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okay hi there welcome to the second in our series little series of three videos updating you on the impact of government subsidies in the second video were going to go step by step through the process of drawing an analysis diagram on subsidies and thats to help you to get the best marks to get you great marks in your assignments quick reminder a subsidy is any form of government support offered to producers occasionally consumers were going to focus on producers in this video and the key point is that a subsidy lowers the cost of supply to a producer and it normally leads to an increase in the output sold at a lower market price to the consumer but as well see the producer even if they cut the price they know theyre going to get the subsidy on top which therefore helps them so how can we show the impact of a subsidy to producers using a supply and demand diagram well heres our diagram p1 is the initial free market market clearing equilibrium price in the absence of any governme