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The u. S. Government has subsidized ethanol production since 1978. With the advent of affordable electric cars, policymakers are considering whether to allow the subsidy to expire. The accompanying graph represents the market for ethanol. Move the supply and/or demand curves to show how reducing the subsidy will affect the ethanol market.

Sagot :

When the subsidy is reduced, the supply curve would shift to the left.

What is a subsidy?

A subsidy is when the government reduces the cost of an item or reduces the cost of production of an item. The aim is to encourage the production or consumption of the item,

What is the impact of a reduction in subsidy?

When the subsidy is reduced, the cost of producing ethanol would increase. This would discourage producers. As a result, there would be a reduction in supply of ethanol. The supply curve would shift to the left. The equilibrium price would increase and equilibrium quantity would decrease.

Please check the attached image for the diagram. To learn more about the change in supply, please check: https://brainly.com/question/15835771

View image Ewomazinoade
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