Explain why the concept of price elasticity of supply (PES) may beusef

1.	Explain why the concept of price elasticity of supply (PES) may beuseful to a government in deciding whether to subsidise theproduction of a product.
Answer» 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

Explain why the concept of price elasticity of supply (PES) may beuseful to a government in deciding whether to subsidise theproduction of a product.

Answer»

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