Use the figure below to answer the question that follows
The curves D\(_{0}\)D\(_{0}\) and S\(_{0}\)S\(_{0}\) are the initial demand and supply curves respectively. What happens when government provides subsidies to producers?
The supply curve will shift from S\(_{0}\)S\(_{2}\) to S\(_{2}\)S\(_{0}\)
The supply curve will shift from S\(_{0}\)S\(_{0}\) to S\(_{1}\)S\(_{1}\)
The demand curve will shift from D\(_{0}\)D\(_{0}\) to D\(_{1}\)D\(_{1}\)
The supply curve will shift from S\(_{0}\)S\(_{0}\) to S\(_{0}\)S\(_{0}\)
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Discussions (8)
QUESTION 7 OBJ WAEC 2020: Subsidies are given and aimed at reducing the cost of production and in the long run reducing the price of the commodity. So if the government provides subsidies, it will enable the producers to produce and supply more to the market even when price is at a fixed equilibrium. The right answer is OPTION A. The supply curve will shift to the right indicating increase in supply occassioned by subsidy.
When government subsidies are implemented to the supplier, an industry is able to allow its producers to produce more goods and services. This increases the overall supply of that good or service, which increases the quantity demanded of that good or service and lowers the overall price of the good or service. ANSWER A or C
the rightward shift means increase in supply, but it doesn’t mean price rises.
The curve moves right, but the equilibrium point (where demand and supply meet) moves downwards along the demand curve, showing a lower price and higher quantity.
So, a rightward shift = more supply, lower price. So B is the correct answer
