In the supply and demand model, a subsidy granted to sellers is illustrated by
A) a downward shift in the demand curve, by the per unit amount of the subsidy.
B) an upward shift in the demand curve, by the per unit amount of the subsidy.
C) a downward shift in the supply curve, by the per unit amount of the subsidy.
D) an upward shift in the supply curve, by the per unit amount of the subsidy.

Question

Quizplus · Accepted Answer

A subsidy to sellers reduces their costs, effectively shifting the supply curve downward by the amount of the subsidy, as it allows sellers to supply the same quantity at a lower price.

In the Supply and Demand Model, a Subsidy Granted to Sellers