Question

Does it matter whether a subsidy is paid to buyers or sellers? why or why not?

Answer 1

No it doesn't matter whether the subsidy is paid to the buyers or sellers. The incodence of subsidy depends on the elasticity of demand and supply curve. Whether it is paid to the buyer or seller doesn't change the fact who takes more benefit of the subsidy.

The party which gains more from the subsidy is more elastic than the other. Example, of demand is more elastic, consumers gain more from the subsidy than the sellers.

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