Low Elasticities Minimize Subsidy's Effect on Quantity Sold

Steps:

• Subsidy lowers producers' costs, shifting supply curve rightward and reducing equilibrium price.
• Lower price increases quantity demanded, but only if demand is elastic.
• If supply elasticity is low, the supply shift is limited, causing minimal price drop.
• With both elasticities low, price falls little and quantity demanded rises little, keeping sales nearly unchanged.

Why D is correct:

• Low demand elasticity means percentage change in quantity demanded is small relative to price change (elasticity <1 by definition), so sales barely increase despite subsidy.

Why the others are wrong:

• A: High demand elasticity would amplify quantity increase from any price drop, raising sales significantly.
• B: High supply elasticity allows large supply shift and price drop, boosting sales even with low demand elasticity.
• C: Insufficient information on option C.

Final answer: D