Question

Explain why the concept of price elasticity of supply (PES) may be
useful to a government in deciding whether to subsidise the
production of a product.​

Answer 1

Answer:

The concept of price elasticityof demand is important for formulating government policies, especially the taxation policy.

Explanation:

Government can impose higher taxes on goods with inelastic demand whereas low rates of taxes imposed on commodities with elastic demand.

Its importance can be realised from the following points :-

1. International trade

2. Formulation of government policies

3. Factor pricing

4. Desicion of monopolist

5. Paradox of poverty amidst plenty

Answer 2

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Explanation:

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