The Federal government gives farmer owners in Texas 25000 in

The Federal government gives farmer owners in Texas $25,000 in subsidies to produce more wheat, and the demand curve for wheat is constant(the demand curve does not shift). Does the Supply curve shift to the right or to the left? As a result, what happens to the equilibrium price and equilibrium quantity of wheat?

Solution

Supply curve shift to the right as the production increases.

However, as there is no change in demand, the equilibrium price of produce goes down and equilibrium quantity traded increases.