a subsidy is a government payment aiming to reduce costs for consumers or producers, to lower prices or increase supply. howwver, with inelastic supply, the quantity supplied cannot increase freely and flexibly, so prices may not decrease significantly. this results in how the benefits of the subsidy mainly go to the producers (who earn higher profits) or less price sensitive consumers (those less affected by price changes, having a rather inelastic demand). while elastic consumers experience less price reductions.

After the provision of a subsidy the price will decrease from p1 to p2 while the quantity transacted will increase from q1 to q2, the cost of production decreases so the supply will increase from s1 to s2. When the demand is more elastic than the supply, the decrease in the price the consumer pays is smaller than the increase in the price the producer receives. So the consumer’s share of the subsidy is smaller than the producer’s subsidy benefit.

When subsidy is imposed, the supply of product will increase from S to S1, quantity will increase from Q to Q1, and due to the decrease in cost of production, the price of product will also decrease from Q to Q1. When demand is more elastic than the supply, the percentage increase in quantity will be smaller then the percentage decrease in price. Therefore, the subsidy that the producer take will be larger than the price decrease in price.

Even the elastic consumer is sensitive to the price adjustment, however if the price remain high due to the inelastic supply. The producer cannot easily increase the quantity supplied. Then they will retain the subsidy benefit rather than decrease the price. Due to this situation, the elastic consumer might not benefit from the subsidy.

When a subsidy is provided, the supply curve increases from s1 to s2, the quantity transacted increases from Q1 to Q2, and the prize decreases from P1 to P2. As the demand is elastic and the supply is inelastic, the decrease in price will be less than the subsidy enjoyed by the producers. Therefore, the consumer will not receive a larger share of subsidy.

(the supply curves shld be more steep whoops

The supply curve shifts downwards from S1 to S2, the quantity transacted increases from Q1 to Q2, price decreases from P1 to P2. It’s given that the supply curve is inelastic, meaning that the consumers are more price sensitive. It’s also seen in the graph that the producers’ benefit it larger than the consumer’ benefit, meaning that the consumers’ may not be able to receive the same amount of subsidies the producers’ do.

When the elasticity of demand is larger than the elasticity of supply, the decrease in price from P0 to P1 (decrease in market price or consumers’ share) is smaller than the difference between P1 and P2 (producers’ share after subsidy). Producers share will be larger than consumer’s share, and the consumer may not receive a larger share of subsidy

The supply shifts downwards from S0 to S1 and the quantity transacted moves from Q0 to Q1. Since subsidy is imposed, the supply is inelastic, meaning the consumer’s share will bare less subsidy than producers’ do.

The producers’ share is (P3-P1)xQ2 while consumers’ benefit is (P1-P3)xQ2, and the consumers’ share is smaller than the producers’ share. Therefore, consumer will not receive a larger share of subsidy.