Incidence of a subsidy

Question 1

What is the incidence of a subsidy

Answer 1

Incidence of a subsidy- distribution of the gains of a subsidy between consumers & producers

Question 2

What does the distribution or incidence of the subsidy depend on?

Answer 2

Distribution of gains depends on elasticity of demand

Question 3

How does the incidence of a subsidy (distribution of it) vary with the price elasticity of demand?

Answer 3

When demand is price elastic, most of the gains go to producers- subsidy paid to producers BUT ⬆️ output-> ⬇️ prices & market price ⬇️ by small amount when demand elastic … ⬇️ benefit for consumers

When demand is price inelastic, most of the gains go to consumers- subsidy paid to producers BUT ⬆️ output-> ⬇️ prices & market price ⬇️ by large amount when demand inelastic … ⬆️ benefit to consumers

IF UNCLEAR DRAW A DIGRAM AND SEE- DEFINITELY CORRECT
NOTICE DROP IN PRICE AND WELL AS SIZE OF INCIDENCE FOR EACH