Answer to Question #107340 in Microeconomics for unnati

Question

with the help of diagram explain the effects and incidence of a subsidy in a market for essential transport.

Answer 1

If subsidies are presented to transport companies, this leads to an increase in supply with constant demand.

This leads to lower prices and an increase in the number of transportations performed, and ultimately to an increase in the profitability of transport companies and a more rational use of energy resources. Since the logic allows you to transfer more goods and passengers with lower energy costs.

In the case of subsidizing transportation consumers, it is impossible to achieve a similar effect, since the use of subsidy means cannot be controlled with a high degree of probability.