Subsidies Flashcards
1
Q
What are Subsidies?
A
An amount of money given by the government to firms to encourage production and consumption( of products with positive externalities).
Price decreases Quantity increases
2
Q
They are more effective on Price __________ goods
A
Elastic
3
Q
What are the Costs of subsidies?
A
It is a significant oppurtunity cost for government.
Other methods may be more effective.
4
Q
What are the Benefits of subsidies?
A
More bought and sold at lower prices.
Higher demand so possibly more profit.
5
Q
It depends on ………
A
size of the subsidy
