Question

A subsidy is the opposite of a tax. with a $0.50 tax on ice-cream cones, the government collects $0.50 from buyers for each cone purchased; with a $0.50 subsidy for ice-cream cones, the government pays buyers $0.50 for each cone purchased. show the effect of a $0.50 per cone subsidy on the demand curve for ice-cream cones.

Answer 1

The concept of subsidy is very well-explained in this item. From the context, subsidy is the amount that is payed by the government to the buyer every time a purchase is made. Since, the concept of subsidy is very favorable to consumers then, the demand for a certain product would definitely go high.