Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Subsidies lower production costs, increasing supply and potentially raising demand for complementary goods.
B
Subsidies only increase the demand for the subsidized good without affecting related goods.
C
Subsidies decrease the supply of the subsidized good, leading to higher prices for related goods.
D
Subsidies have no impact on market dynamics or consumer behavior.
Understanding the Answer
Let's break down why this is correct
Answer
Government subsidies are financial support provided by the government to help lower the cost of producing goods or services. When a subsidy is given to producers, it makes it cheaper for them to create their products. This often leads to an increase in supply, meaning that more of the product is available in the market. For example, if the government provides subsidies to farmers for growing corn, they can produce more corn at a lower price, which can lead to lower prices for corn in stores. As a result, consumers may buy more corn because it is more affordable, which shows how subsidies can influence both supply and demand in a market.
Detailed Explanation
Subsidies help lower the costs for producers. Other options are incorrect because This answer suggests that subsidies only help the good that gets the money; This option says subsidies reduce supply, which is the opposite of what happens.
Key Concepts
Government Subsidies
Supply and Demand
Market Dynamics
Topic
Government Subsidies and Market Effects
Difficulty
easy level question
Cognitive Level
understand
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