Learning Path
Question & Answer1
Understand Question2
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Explore TopicChoose the Best Answer
A
Consumption subsidies decrease the price of demerit goods, leading to increased consumption.
B
Consumption subsidies increase the price of demerit goods, reducing their consumption.
C
Consumption subsidies have no effect on the consumption of demerit goods.
D
Consumption subsidies eliminate the demand for demerit goods entirely.
Understanding the Answer
Let's break down why this is correct
Answer
Consumption subsidies are financial aids provided by the government to lower the price of certain goods, making them more affordable for people. When these subsidies are applied to demerit goods, which are products considered harmful to individuals or society, they can lead to an increase in consumption of those goods. For example, if a government subsidizes sugary drinks, people might buy and consume more of them because they are cheaper, even though these drinks can lead to health issues like obesity. This can create a problem, as the intended goal of promoting public welfare can be undermined by encouraging the use of items that may harm health. Therefore, while subsidies can help make necessary goods more accessible, they can also unintentionally promote the use of harmful products.
Detailed Explanation
When the government gives money to lower the price of demerit goods, more people can afford them. Other options are incorrect because This answer suggests that subsidies make demerit goods more expensive; This choice says subsidies have no effect.
Key Concepts
consumption subsidies
demerit goods
Topic
Types of Subsidies
Difficulty
medium level question
Cognitive Level
understand
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