Question

How does a subsidy provided for a good affect consumers?

Answer 1

Answer: D. It increases consumers’ incomes and encourages consumers to buy the good

Explanation:

A subsidy is an amount of money that is given by the government to producers or farmers so as to increase the production of a particular good and also to reduce the price of the good.

Subsidies affect consumers as it increases consumers’ incomes and encourages consumers to buy the good. This is because the subsidized goods will be sold at a cheaper price which means that the income of the consumer is increased and also encourages more purchases of the good.