Economics (AS & A Level) · May / June 2022 · Paper 14 · Question 16
9708Methods and effects of government intervention in markets
What will be the result of a subsidy that is given to the producers of a good with an inelastic demand curve?
- AThe equilibrium price of the good will fall by a larger percentage than the fall in equilibrium quantity.
- BThe equilibrium price of the good will fall by a larger percentage than the rise in equilibrium quantity.
- CThe equilibrium price of the good will fall by a smaller percentage than the fall in equilibrium quantity.
- DThe equilibrium price of the good will fall by a smaller percentage than the rise in equilibrium quantity.
As printed in the paper
Show the answer
Correct answer: B. The equilibrium price of the good will fall by a larger percentage than the rise in equilibrium quantity.
Make a free account to save your answers and see your weak topics and ask the AI why a wrong answer is wrong.