Th1.2: Subsidies

Question 1

What is a subsidy?

Answer 1

a grant given by the government to a producer to lower their costs of production and encourage them to produce more

Question 2

They could be given to necessities, i.e…

Answer 2

companies employing disadvantaged workers or those manufacturing in the UK to keep them competitive with imported goods

Question 3

Refer to PP

Look at Graph 17. Why does supply shift that way?

Answer 3

since the producer sees a fall in production costs

Question 4

What can subsidies be used to do in terms of Macro economics?

Answer 4

encourage exports or protect domestic industries