A-LevelEconomicsGovernment microeconomic intervention9708/12 · Oct/Nov 2020 · Q181 Mark
The market for good X is in equilibrium. The government introduces a subsidy to the producers of good X. Under which conditions will the total expenditure by the government on the subsidy be the greatest?
Aprice elasticity of demand for good X <1, price elasticity of supply for good X <1
Bprice elasticity of demand for good X <1, price elasticity of supply for good X >1
Cprice elasticity of demand for good X >1, price elasticity of supply for good X <1
Dprice elasticity of demand for good X >1, price elasticity of supply for good X >1
✓ Correct answer
D: price elasticity of demand for good X >1, price elasticity of supply for good X >1
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