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Now, let's discuss subsidies in markets. A subsidy, opposite of a tax, is money given by the government to the producer for making an item. With a $4 subsidy in a market, the supply curve shifts downward by the amount of the subsidy. This change lowers the cost of production for the producer. This downward shift in the supply curve represents an increase in supply, shifting to the right. Each point on the supply curve is moved down by $4 to accurately represent this change. For example, a point at 100,10 now becomes 100,6 with a subsidy.
