True or false? Ceteris paribus, the more elastic the supply curve, the larger the total subsidy.

Answer: True

The formula to compute the price elasticity of supply is:

If the supply curve is more elastic, the market may have a larger total subsidy. This means that the good has many close substitutes . If the price of Brand A increases, the quantity of Brand B increases. This is because the consumers has no preference over the two goods. And therefore, the consumers can easily switch from one substitutes to another.