Question on: WAEC Economics - 2015
increase in production subsidies will shift
A
the demand curve to the left
B
the supply curve to the right
C
both the supply demand curves to the left
D
supply curve to the left and demand curve to the right
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Correct Option: B
Subsidy impact. Marginal subsidies on production will shift the supply curve to the right until the vertical distance between the two supply curves is equal to the per unit subsidy; when other things remain equal, this will decrease price paid by the consumers (which is equal to the new market price) and increase the price received by the producers.
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