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A subsidy is the opposite of a tax; it is when the government gives money to producers instead of taking it. This makes it cheaper for producers to make goods, shifting the supply curve downwards by the amount of the subsidy. This effectively increases supply, but to accurately measure it, each point on the curve is shifted downwards by the amount of the subsidy. For example, a $4 subsidy would shift a point from 100,10 to 100,6. This allows us to see the impact of the subsidy on production.
