Subsidy Incidence Measures Consumer Price Reduction Steps:

• Locate original equilibrium price where S1 intersects demand.
• Locate new equilibrium price where S2 intersects demand.
• Compute price drop (original minus new price) in each diagram.
• Select diagram with largest price drop as greatest consumer incidence.

Why C is correct:

• Diagram C shows the largest consumer price reduction, per the economic principle that subsidy benefits accrue more to consumers when demand is relatively inelastic compared to supply.

Why the others are wrong:

• A: Smaller price drop due to relatively elastic demand shifting incidence toward producers.
• B: Even smaller price drop from more elastic demand than A.
• D: Minimal price drop as demand elasticity is highest, favoring producers.

Final answer: C