ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Disadvantages of Subsidies Though one of the advantages of subsidies is the greater supply of goods, a shortage of supply can also occur. This is because lowered prices can lead to a sudden rise in demand that many producers may find very hard to meet.

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: -The correct answer is Interest tax.

Detailed explanation-4: -Subsidies are payments, tax breaks, or other forms of economic support given by governments to certain industries or economic sectors. The goal of subsidies is to aid or support what are deemed to be key parts of the economy or national infrastructure.