Question

A new report has shown that helmets reduce the head injuries from biking accidents. To ensure that as many individuals as possible use helmets, the government recently decided to subsidize the production of helmets. Which of the following will happen as a result of this subsidy?
Choose one or more:

A. The demand curve for helmets will increase.

B. The demand curve for helmets will remain the same.

C. The demand curve for helmets will shift to the left.

D. The supply curve for helmets will shift to the left.

E. The supply curve for helmets will shift to the right.

Answer 1

Answer:

E. The supply curve for helmets will shift to the right.

B. The demand curve for helmets will remain the same.

Explanation:

In order to promote the use of helmets the subsidy will result in the shift of supply curve to the right because through subsidy producers are encouraged to supply more. Hence increasing the output.

Whereas the demand curve will remain the same. There will be no shift in demand curve. Only movements along the demand curve will be observed, the demand curve stays the same.

It is shown in the diagram in attachment.