ECONOMICS
DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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How would a new government subsidy for rice farmers affect the market for rice?
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It would increase the supply by decreasing rice farmers’ production cost
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It would increase the supply by increasing the demand for rice
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Either A or B
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None of the above
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Explanation:
Detailed explanation-1: -Agricultural input subsidies have long been used to promote smallholder farmers’ use of inputs, increase wages, reduce food prices and promote economic growth.
Detailed explanation-2: -The effect of a subsidy is to shift the supply or demand curve to the right (i.e. increases the supply or demand) by the amount of the subsidy. If a consumer is receiving the subsidy, a lower price of a good resulting from the marginal subsidy on consumption increases demand, shifting the demand curve to the right.
Detailed explanation-3: -Some advantages of subsidies include inflation control and moderation of supply and demand, while disadvantages include a potential increase in taxes on citizens in subsidizing countries.
There is 1 question to complete.