The price that buyers pay for the good falls This is true f

. The price that buyers pay for the good falls. This is true for Subsidies Price Ceillings Price Floors Taxes 8 Consumer surplus definitely decreases. This is true for Subsidies Price Cellings Price Floors Taxes 9. The quantity of the good that is consumed Increases. This is true for Taxes Subsidies Price Cellings Price Floors

Solution

7. The price that buyers pay for the good falls.

Let\'s look at the options and try to see what all answer hold true in this case. We know that the taxes simply increase the price that the buyers need to pay for the goods. Price ceilings ensure that sellers are not able to charge beyond a certain limit. But this may not guarantee a price decline. Also, the price floors specify the minimum price which needs to be charged. However, subsidies on the good make sure that the price that a buyer pay for the good is below the market level price and the amount of subsidy is born by the government.

8. Consumer surplus is defined to be the surplus that the consumer enjoys by paying a lesser price than the reservation(maximum) price he might want to pay for the same quantity of the goods.

Thus, consumer surplus would decrease in case there is an increase in the price of the goods.

9. The quantity of the good that is consumed will increase in case of subsidies.