ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -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.

Detailed explanation-2: -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.

Detailed explanation-3: -Governments establish many policies that guide businesses. The government can make changes in fiscal policy which leads to changes in taxes, trade, subsidies, regulations, interest rates, licencing and more. Businesses should be flexible enough to respond to changing rules and policies.

Detailed explanation-4: -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.