Subsidies impact on stakeholders

Question 1

Domestic producers analysis

Answer 1

They gain from the subsidy since they get the world price and a subsidy payment. Higher revenuer lift profits and might lead to a higher share price. Increased output creates the possibility for EOS

Question 2

Domestic producers evaluation

Answer 2

There is a risk of dependency culture as businesses rely on subsidies rather than taking their own steps to become more competitive by increasing productivity, efficiency and innovation.

Question 3

Consumer analysis

Answer 3

Assuming that the subsidy isn’t large enough to change the world price, there is no direct effect on the prices consumer pays

Question 4

Consumer evaluation

Answer 4

They may face higher taxes if expensive subsidies take up a high % of government spending.

Question 5

Government analysis

Answer 5

Subsidy can be an effective non tariff barrier to reduce the volume of imports by encouraging domestic production.

Question 6

Government evaluation

Answer 6

A subsidy doesnt directly generate tax revenue. Increased spending on subsidies may then cause a growing budget deficit.