How does a subsidy intended to increase production affect market efficiency?

A subsidy is a financial support given by the government to help businesses produce more goods or services. When the government provides a subsidy, it lowers the cost of production for companies, which encourages them to produce more. This can lead to an increase in supply in the market, which may help to lower prices for consumers. However, while subsidies can boost production and help certain industries, they can also lead to inefficiencies because they may encourage overproduction or support businesses that wouldn't succeed without help. For example, if the government gives a subsidy to a struggling solar panel company, it might produce more panels than the market needs, wasting resources that could be better used elsewhere.