Subsidies for commodities with low elasticities of demand


If a country wants to subsidize some goods in an optimal way, which statement is TRUE?

(a) Subsidies for commodities with low elasticities of demand result in larger deadweight losses than do subsidies for commodities with high elasticities of demand.

(b) All goods should receive the same subsidy in order to be optimal.

(c)The country should subsidize commodities with low elasticities of demand more than commodities with high elasticities of demand.

(d) The country should subsidize commodities with high elasticities of demand more than commodities with low elasticities of demand.

Solution Preview :

Prepared by a verified Expert
Business Management: Subsidies for commodities with low elasticities of demand
Reference No:- TGS02545832

Now Priced at $10 (50% Discount)

Recommended (90%)

Rated (4.3/5)