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ANEK [815]
3 years ago
9

How do subsidies generally affect the supply curve? Why?

History
2 answers:
stellarik [79]3 years ago
8 0

Effects of Supply Subsidies. When the government provides a supply-side subsidy to the producers of a product, the supply curve shifts to the right and the demand curve remains the same. Because they are being subsidized, producers are encouraged to produce more of a product and are able to do so for less.

vlada-n [284]3 years ago
8 0

Effects of Supply Subsidies. When the government provides a supply-side subsidy to the producers of a product, the supply curve shifts to the right and the demand curve remains the same. Because they are being subsidized, producers are encouraged to produce more of a product and are able to do so for less.

he effect of a specific per unit subsidy is to shift the supply curve vertically downwards by the amount of the subsidy. In this case the new supply curve will be parallel to the original. Depending on elasticity of demand, the effect is to reduce price and increase output.

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The correct answer to this open question is the following.

Although there are no options attached we can say the following.

The explanation of the laws of supply and demand from the perspective of the consumer (demand) and the perspective of the producer (supply) is the following

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A simple example is winter clothes in summer and summer clothes in winter. Nobody is going to ask for a snow jacket in the summertime, so this product won't be available or is going to be relatively cheap because the weather is hot. On the other hand, during winter, that product would be expensive because a lot of people are going to be interested in purchasing one. And as nobody will ask for short pants, these are going to be cheap.

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