Question

What will be the effect of raising production subsidies on the supply of a commodity?

Options

• Downward movement along the supply curve.

• Leftward shift of supply curve.

• Rightward shift of supply curve.

• Upward movement along the supply curve.

Answer 1

Rightward shift of supply curve

Explanation:

Increasing production subsidies has the effect of shifting the supply curve of a commodity to the right, signaling a rise in the quantity of the commodity supplied at every price level. This occurs because subsidies reduce production costs for producers, making it more financially advantageous for them to supply higher quantities of the commodity at any given price level.