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When there is a subsidy, the government provides money to producers for making an item, which lowers the cost of production. This subsidy shifts the supply curve downward by the amount of the subsidy, making it cheaper to produce items. Each point on the supply curve is shifted downward by the amount of the subsidy, resulting in an increase in supply. For example, a $4 subsidy would shift a point from 100,10 to 100,6 on the supply curve.
