Draw the graph · Micro · Supply and demand
A subsidy for solar panels
Drag a curve sideways, or use its arrows. A curve you do not move is a curve you are saying stays put. Make each shift clear enough that a reader could see it.
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Demand stays put. Supply shifts right.
A subsidy paid to sellers lowers what they must receive from buyers to offer any given quantity. At every price, installers are willing to supply more, so the supply curve shifts right, or equivalently down by the size of the subsidy. Demand is unchanged. The lower price moves buyers down along their demand curve.
Price falls and quantity rises.
Common mistake. A frequent error is to shift demand right because 'solar becomes cheaper for households.' The price falls because of the supply shift, and the extra buying is a movement along demand.
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Lesson: Subsidies