Question

Suppose the government increases subsidies for wheat farmers who grow the wheat that goes into hamburger buns.

Answer 1

Answer:

An increase in subsidy for wheat by the government will reduce the cost of producing wheat by the farmers. As a result, the cost of producing a hamburger buns will also reduce. This will mean that there will a decrease in cost of producing a hamburger. Hence, the hamburger will be sold at a cheaper price due to which it will increase in supply. Such strategies can be very beneficial for the farmers as well as the restaurants which sell hamburgers.