A subsidy is a sum of money which is given by the government to encourage the production of a particular good or service.
The government essentially provides money to firms and in return they will produce the good or service which the government would like to encourage the production of. If they are already producing the good, the subsidy is likely to lead to the firm increasing their supply through producing more.
As firms are provided with money to produce a good or service, this leads to a decrease in their costs. As a result they have more incentive to produce and in addition are able to charge a lower price for consumers.
Icons made by Freepic from www.flaticon.com