Y1 18 Subsidy

Question 1

What is a subsidy

Answer 1

Money grants to firms by the government to reduce costs to production and encourage increase in output

Question 2

Subsidy Pros

Answer 2

Prices fall, consumer surplus increase, necessities cheaper, producer revenue + surplus increase, greater employment, solve market failure, encourages affordability

Question 3

Subsidy cons

Answer 3

Subsidy expense, opportunity cost, long run funding (debt), subsidy efficiency, producer complacency, dead weight loss