Elastic demand curve and inelastic supply curve

Reference no: EM13686670

Consider the market for picture frames.

1. If the market has a very elastic demand curve and inelastic supply curve, how would the application of a subsidy is shared between consumers and producers? Use the tools of producer surplus and consumer surplus to answer this question. Is there a deadweight loss from the subsidy?

2. If instead, the picture frame market were characterized by a very an inelastic demand curve and elastic supply curve, how would the application of a subsidy be shared between consumers and producers.

Reference no: EM13686670

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