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Draw the demand and supply curves for product x. Now, assume the government decides to give...

Draw the demand and supply curves for product x. Now, assume the government decides to give producers a subsidy of $1 for each unit produced. Show that on your demand and supply curve and explain.

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In the above figure, x-axis shows quantity and y-axis shows price . D is the demand curve S is the supply curve. E is the initial equilibrium point. If government decides to give producers a subsidy of $1 for each unit produced, an industry is able to allow its producers to produce more goods, the supply increases, the supply curve shift to the right. The equilibrium changes from E to E1. The price decreases from p to p1 and quantity increases from q to q1.

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