How do subsidies correct market failure?

Subsidies correct the market failure by lowering the cost of production and increasing goods and services demanded and supplied through the government paying part of the firm's cost. It pushes production back up to optimal levels, thus encouraging more consumption. Subsidies can be justified for products that offer benefits to society by shifting the supply curve to the right. With that said, Subsidies encourage social efficiency in terms of consumers paying the socially efficient price that involves external benefits. Lastly, subsidies in food will correct market failure as it will encourage firms to develop more goods that have positive externalities.