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The government wants to increase the overall health of its citizens. It decides it can do this by either (a) subsidising cycling, or (b) subsidising
The government wants to increase the overall health of its citizens. It decides it can do this by either (a) subsidising cycling, or (b) subsidising healthy eating. Reports suggest that both demand and supply for cycling is highly price-sensitive (or elastic), while both demand and supply for healthy eating have low price-sensitivity. To get the best bang-for-its-buck, should the government subsidise cycling, or healthy foods? (For ease of analysis, assume the current price and quantity are the same for healthy foods and cycling.)
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