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Explain why the government might choose to grant a subsidy to producers of wheat.

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Introduction

Explain why the government might choose to grant a subsidy to producers of wheat. A subsidy is an amount of money paid by the government to a firm. There are many reasons why the government might choose to subsidize producers of wheat. In many countries, wheat is considered to be an essential good. The government would therefore hope for consumption of wheat to increase, which can be achieved through lower prices. If a subsidy is granted to producers of wheat, their costs of production will be lowered. ...read more.

Middle

Another reason why the government might choose to grant subsidies is so that they can guarantee a supply of products that they believe are necessary for the economy. In this case, wheat can be regarded as a basic food supply, as it is used in the production of other goods, such as bread and noodles; therefore, the government might grant a subsidy to producers of wheat, in order to make sure of a constant supply. By enabling producers to lower their costs of production, the government allows them to earn more profit, and therefore provides an incentive for the producers to increase supply. ...read more.

Conclusion

The government might also choose to grant a subsidy to producers of wheat in order to make them more competitive. By providing a subsidy, the government allows producers to achieve lower costs of production. Producers can then in turn lower their prices, and therefore hold their own more easily against foreign competitors. In conclusion, the government might choose to grant a subsidy to producers of wheat for several reasons. Because wheat is generally regarded as a necessity, the government will want to encourage its consumption by supporting its producers. This will result in decreased market price, as well as increased market demand. ?? ?? ?? ?? Becky Chang H3NTO ...read more.

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