A local government decides to provide subsidies to dairy farmers to reduce the cost of milk production. As a result, milk prices drop significantly. What is the likely impact of these subsidies on the market for cheese, a complementary good to milk?

When the local government gives subsidies to dairy farmers, it helps them produce milk more cheaply. This means that the price of milk goes down, making it more affordable for consumers. Since cheese is often made from milk, when milk prices drop, the cost of producing cheese also tends to decrease. As a result, cheese can become cheaper for people to buy, leading to an increase in demand for cheese because more people can afford it. For example, if a family used to buy cheese only for special occasions but now finds it cheaper, they might start buying it regularly, which shows how the subsidies can positively affect the cheese market.