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JAMB Economics 2025 Question 9

Question 9

Price Determination

The curves D0D0 and S0S0 are the demand and supply curves respectively. What happens when government subsidizes producers in order to boost output?

Diagram for this question
  1. A.The supply curve will shift from S0S0 to S2S2
  2. B.The supply curve will shift from S0S0 to S1S1
  3. C.The supply curve will shift from S2S2 to S1S1
  4. D.The supply curve will shift from S1S1 to S0S0
  5. E.The demand curve will shift from D0D0 to D1D1.
Show the answer and explanation

Answer: A (The supply curve will shift from S0S0 to S2S2)

Explanation

A subsidy lowers producers' costs, so they supply more at every price and the supply curve shifts to the right. In the diagram, S2S2 lies to the right of S0S0.