2.7.2 - Subsidies Flashcards
1
Q
Define subsidies
A
Amount of money paid by the government to producers to encourage the consumption and production of a good or service.
2
Q
Draw and label a subsidy diagram
A
3
Q
Impact on consumers
A
- Fall in prices
- Increased surplus
- Benefit to low income
4
Q
Impact on Producers
A
- Gain in revenue and surplus
5
Q
Impact on Government
A
- Opportunity cost
- May have to raise taxes
- Cost in management
6
Q
Impact on Welfare
A
Inefficient use of resources in the market; less efficient producers enter the market
