Subsidy on the production of a commodity causes: - Vidyadip

MCQ

Subsidy on the production of a commodity causes:

✓
increase in supply
B
no change in supply
C
decrease in supply
D
Contraction of supply

✓

Answer

Correct option: A.

increase in supply

(a) increase in supply
Explanation: The subsidy is offered to the producers to increase the production of the commodity when it is economically not viable for the producers to do so at the existing market price. When the subsidy is offered, the supply curve of the commodity shifts to the right.

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