ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Basically, subsidies are provided by the government to specific industries with the aim of keeping the prices of products and services low for people to be able to afford them and also to encourage production and consumption.

Detailed explanation-2: -When government subsidies are implemented to the supplier, an industry is able to allow its producers to produce more goods and services. This increases the overall supply of that good or service, which increases the quantity demanded of that good or service and lowers the overall price of the good or service.

Detailed explanation-3: -Producer/production subsidies ensure producers are better off by either supplying market price support, direct support, or payments to factors of production. Consumer/consumption subsidies commonly reduce the price of goods and services to the consumer.

Detailed explanation-4: -The subsidy lowers the cost for the producers to bring the good or service to market. If the right level of subsidization is provided, all other things being equal, then the market failure should be corrected.

Detailed explanation-5: -Answer and Explanation: A government subsidy to the producers of a product increases product supply. This happens because a subsidy helps in the reduction of the cost of production. The reduction in the cost of production makes the production of more outputs possible.