If a government imposes a subsidy on a good, what is the likely effect on market efficiency?

When a government imposes a subsidy on a good, it means they provide financial support to help lower the cost of that good for consumers. This usually leads to an increase in demand because people can buy more of the subsidized good at a lower price. As a result, producers may increase their supply to meet the higher demand, which can lead to more jobs and economic activity. However, while subsidies can help make goods more affordable, they can also lead to market inefficiencies, like overproduction or misallocation of resources, because producers might focus too much on subsidized goods rather than responding to actual consumer needs. For example, if the government subsidizes electric cars, more people might buy them, but it could also mean that resources are diverted from other important areas, like public transportation.