Imagine that an environmental regulation will increase the demand for particular good, increasing gains from trade in that market. Further, imagine that supply of this good might be relatively elastic or relatively inelastic.
A. If supply is relatively elastic, who will enjoy most of the benefit of the demand increase, consumers or producers? Explain or show this.
B. If demand is relatively inelastic, who will enjoy most of the benefit of the demand increase, consumers or producers? Explain or show this.