The market for good X is initially in equilibrium. The government then introduces a subsidy for producers of good X. Under what conditions will the government’s total expenditure on the subsidy be highest?
- Aprice elasticity of demand for good X <1 / price elasticity of supply for good X <1
- Bprice elasticity of demand for good X <1 / price elasticity of supply for good X >1
- Cprice elasticity of demand for good X >1 / price elasticity of supply for good X <1
- Dprice elasticity of demand for good X >1 / price elasticity of supply for good X >1