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When there is a subsidy in a market, the supply curve shifts downwards by the amount of the subsidy, making it cheaper to produce the item. This means that the cost of making the item decreases because the government is providing financial support. The subsidy impacts the supply curve by physically moving it down, resulting in an increase in supply. Each point on the supply curve is adjusted downwards by the amount of the subsidy, leading to a lower cost of production.
