Suppose that the government provides a subsidy for the consumption of good X.The demand curve with the subsidy will lie to the ______________ of the demand curve without the subsidy,and the equilibrium price of good X will be __________ with the subsidy than without.
A) left;lower
B) left; higher
C) right; higher
D) right;lower

Question

Quizplus · Accepted Answer

With the subsidy, the demand for good X will increase, shifting the demand curve to the right. Therefore, the equilibrium price will be higher with a subsidy than without. Option C is the only choice that reflects this scenario. Option D would be incorrect because a rightward shift in the demand curve increases the equilibrium quantity, which would cause an increase in price.

Suppose That the Government Provides a Subsidy for the Consumption