Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
They increase consumer welfare by lowering the effective price of goods.
B
They decrease consumer welfare by creating market distortions.
C
They have no impact on consumer welfare.
D
They only benefit producers without affecting consumers.
Understanding the Answer
Let's break down why this is correct
Answer
Per unit subsidies are payments made by the government for each unit of a product sold, which can lower the price for consumers. When the price of a good decreases because of this subsidy, consumers can buy more of it or save money on their purchases, which increases their overall welfare. For example, if the government gives a subsidy for milk, the price drops from $3 to $2 per gallon. This means families can buy more milk for the same amount of money, leading to better nutrition and satisfaction. Overall, per unit subsidies can make essential goods more affordable and improve the quality of life for consumers in the economy.
Detailed Explanation
Per unit subsidies lower the price of goods for consumers. Other options are incorrect because Some think subsidies hurt consumers by messing up the market; It's a common belief that subsidies don't change anything for consumers.
Key Concepts
per unit subsidy
welfare economics
Topic
Per Unit Subsidies in Economics
Difficulty
medium level question
Cognitive Level
understand
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