Final answer:
A government subsidy is money granted by the government to assist a business or industry in lowering the cost of its product or service. Subsidies reduce the cost of production and increase supply, shifting supply to the right.
Step-by-step explanation:
A government subsidy is money granted by the government to assist a business or industry in lowering the cost of its product or service. Subsidies reduce the cost of production and increase supply, shifting supply to the right. They can take the form of direct payments or tax reductions. For example, the government may provide subsidies to the agriculture and energy industries to cover the risks associated with unpredictable weather or oil exploration.