How do subsidies for positive externalities affect market equilibrium and social welfare?

Subsidies for positive externalities are financial support given by the government to encourage activities that have benefits for society, like education or renewable energy. When the government provides these subsidies, it lowers the cost for consumers or producers, which can lead to an increase in the quantity of goods or services produced. This increase helps shift the market equilibrium, meaning that more people can access and enjoy these beneficial services. For example, if the government gives subsidies for solar panels, more people may install them, leading to cleaner energy and a healthier environment. Overall, these subsidies improve social welfare by promoting activities that benefit everyone, not just the individuals directly involved.