Which type of subsidy can lead to an increase in the consumption of demerit goods by making them cheaper, while simultaneously impacting the import of competing products?

A subsidy that can increase the consumption of demerit goods is known as a production subsidy. This type of subsidy is given to producers, reducing their costs and allowing them to sell their products at lower prices. When the price of demerit goods, like sugary drinks or tobacco, decreases, more people may buy them because they seem more affordable. For example, if a government provides financial support to local soda manufacturers, the price of soda might drop, encouraging more people to consume it despite its health risks. Additionally, this can impact imports because cheaper local products may lead to reduced demand for similar imported goods.