subsidies

Question 1

tav revenue used for?

Answer 1

subsidies,encourages production and consumption of goods that are good for society

Question 2

subsidy

Answer 2

grant from the government to a firm to increase supply

Question 3

firms and subsidies

Answer 3

when givena subsidy they are more incentivised to supply

governments grant allows firms to make more moeny after selling their goods

Question 4

subsidy pushing curve vertically down?

Answer 4

pushes supply curve vertically down as the size of the subsidy

• subsidies give firms incentive to supply more

-firms willing to lower their prices as they are receiving a subsidy from the government

-lower prices are compensated for by the subsidy

Question 5

subsidies and equilibrium- why do firms not reduce their price by the size of the subsidy given to them

Answer 5

if they drop price by the size of the subsidy they gain no benefit

producers lower it slightly so they can keep part of the benefit of the subsidy

(also allows an increase in quantity)

Question 6

how to calculate total cost to government

Answer 6

size of subsidy x quantity sold

Question 7

size of subsidy on graph

Answer 7

distance between intial supply curve and supply curve vertically down after the subsidy

Question 8

subsidy diagram analysis

Answer 8

bottom square= consumer benefithow much consumers benefit from subsidy

top square= producer benefit- how muchbenefit producers make

rectangle area shows total cost of subsidy