The following is a supply curve for blueberries. Show how the following headline would change the curve: “The Federal govt. has decided to provide a subsidy to blueberry growers throughout the Midwest”. This is a change in what kind of supply? What is the determinant?

The following is a supply curve for blueberries. Show how the following headline would change the curve: “The Federal govt. has decided to provide a subsidy to blueberry growers throughout the Midwest”.

This is a change in what kind of supply?

What is the determinant?

 

 

Answer:

When the subsidy is provided to the blueberry growers than the supply of blueberry increases in the market. When the supply of commodity changes due to change in factors other than the price of the commodity than supply curve shifts. This shifts the supply curve rightwards. Change in supply occurs in this case regardless of the change in quantity supplied.

Government policy is the determinant which causes rightward shift in the supply. Government policy includes change in taxation or provision of subsidy.

Asked on February 15, 2018 in economics.
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