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When a subsidy is introduced in a market, the cost of making an item decreases as the government is providing money to producers. This causes the supply curve to shift downward, indicating an increase in supply. Each point on the curve is moved down by the amount of the subsidy, such as from 100 comma 10 to 100 comma 6. The subsidy results in lower production costs for producers, leading to an increase in the quantity supplied in the market.
