Subsidies

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4 Terms

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What is a subsidy?

A grant given by the government to producers to encourage production of a good or service

2
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What are three reasons why the government would provide a subsidy?

  • Encourage consumption of merit goods

  • Make goods more affordable

  • Protect unemployment in trade markets

3
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What is a merit good?

Goods with positive externalities which are good for society

4
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How can the impact of a subsidy be shown?

Subsidy diagram