ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Supply shifters include (1) prices of factors of production, (2) returns from alternative activities, (3) technology, (4) seller expectations, (5) natural events, and (6) the number of sellers. When these other variables change, the all-other-things-unchanged conditions behind the original supply curve no longer hold.

Detailed explanation-2: -From the firm’s perspective, taxes or regulations are an additional cost of production that shifts supply to the left, leading the firm to produce a lower quantity at every given price. Government subsidies, however, reduce the cost of production and increase supply at every given price, shifting supply to the right.

Detailed explanation-3: -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-4: -When the government gives a subsidy on the production of a good, marginal and average costs of production tend to fall. Accordingly, producers will supply more at the same price or supply the same quantity at the lower price.