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Per Unit Subsidies in Economics
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What effect do per unit subsidies typically have on the supply curve in a market?

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Choose the Best Answer

A

Shift the supply curve to the left

B

Shift the supply curve to the right

C

Have no effect on the supply curve

D

Shift the demand curve to the right

Understanding the Answer

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Answer

Per unit subsidies are payments made by the government to producers for each unit of a good they produce. When a subsidy is introduced, it lowers the cost of production for producers, which encourages them to supply more of the good at every price level. As a result, the supply curve shifts to the right, meaning that at each price, producers are willing to supply more than before. For example, if a farmer receives a subsidy for each bushel of corn they sell, they may decide to grow more corn because they can earn more money. This increase in supply can lead to lower prices for consumers and more availability of the product in the market.

Detailed Explanation

Per unit subsidies help producers by lowering their costs. Other options are incorrect because Some might think subsidies make it harder to produce goods; It's a common mistake to think subsidies have no impact.

Key Concepts

supply and demand
Topic

Per Unit Subsidies in Economics

Difficulty

easy level question

Cognitive Level

understand

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