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In this video tutorial, the concept of subsidies in economics is explained. Subsidies are payments made by the government to producers when making a particular item. The text discusses how a $4 subsidy in a market affects the supply curve, making it move downward physically by the amount of the subsidy. This results in a decrease in the cost of production and an increase in supply, leading to a shift in the curve. Each point on the supply curve is moved down by the $4 subsidy amount, causing a change in the quantity supplied at each price point.
