How Does a Government Subsidy for the Consumption of a Good

Question

Examlex · Accepted Answer

The Answer is The demand curve indicates how much of the good is consumed at a given price.The higher the price,the lower the consumption.By subsidizing consumption,the government bears part of the cost and thereby lowers the effective price for consumers.The result is that for any given official price,consumption is higher than before,because consumers pay the effective price,not the official one.When consumption at every price level increases,that represents a rightward shift of the demand curve.

How Does a Government Subsidy for the Consumption of a Good

Definitions: