A subsidy targeted to raise consumption by a specific amount will cost the most when:
A) both supply and demand are inelastic.
B) supply is inelastic and demand is elastic.
C) supply is elastic and demand is inelastic.
D) both supply and demand are elastic.

Question

Quizplus · Accepted Answer

When both supply and demand are inelastic, the subsidy will have the greatest impact on consumption, resulting in the highest cost.

A Subsidy Targeted to Raise Consumption by a Specific Amount