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The government offers generous subsidies to support the farmers and new research indicates gluten’s negative impact...

The government offers generous subsidies to support the farmers and new research indicates gluten’s negative impact on the digestive system.

Sketch what happens to the demand and/or supply curves and, as result, what happens to the equilibrium price. Provide an explanation.

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Answer #1

the subsidies can increase the supply as a result of which supply curve will shift to the right as shown in the figure and this decrease the equilibrium price and increases the equilibrium quantity.

there is a negative impact of gluten in the digestive system what happens is that the demand increases as a result of this agreement or shipped to the left in this can decrease the equilibrium price and decrease the equilibrium quantity.

ultimately in both the cases the prices decreased and therefore the equilibrium price is decreased but the equilibrium quantity can either increase or decrease depending on the effect of subsidy is more or the negative effect of gluten is more.

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