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In this video tutorial, the effects of a subsidy on the demand and supply diagram are discussed. A subsidy is described as extra money given by the government to a business to increase supply or lower prices. An example is given where Billy's Bread, a low-cost food, receives a subsidy to keep prices low. This is a common scenario due to bread being heavily subsidized and widely consumed. The effects of the subsidy are illustrated using a demand and supply diagram.
