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Incidence of Subsidies on Consumers and Producers

Study Edexcel Economics subsidy-incidence questions by reading the post-subsidy diagram and calculating how the subsidy is divided between producers and consumers.

Syllabus
2019
Course
Economics YEC11
Level
AS

Exam points

  • Identify the subsidy wedge and distinguish the price paid by consumers from the price received by producers.
  • Calculate producer incidence as the subsidy retained per unit multiplied by the post-subsidy quantity.
  • Use the diagram’s post-subsidy quantity and price differences before selecting the incidence value.

1.3.4.4d - incidence of subsidies on consumers and producers question 1

[Maximum number: 1]

The diagram shows the market for wheat in India after a production subsidy. Which is the producer incidence of the subsidy?

A

Rs 217 500 000

B

Rs 435 000 000

C

Rs 1 812 500 000

D

Rs 2 247 500 000

Original examination diagram

Original examination diagram

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