4.4 - production and export subsidies

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6 Terms

1
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production subsidies definition

payments per unit of output by the government to domestic firms that compete with imports

2
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production subsidy graph

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3
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winning stakeholders in production subsidies:

  • domestic producers

    • receive Pw+s

    • production expands Q1 → Q3

  • domestic employment increases

4
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neutral impacts in production subsidies:

  • consumers

    • price stays at Pw

    • Qd stays the same

5
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loosing stakeholders in production subsidies

  • government budget

    • expense = (Pw+s = Pw) x Q3

  • taxpayers

  • increased efficiency in production

  • exporting countries

    • can export less goods

  • global misallocation of resources

6
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export subsidies definition

subsidy is paid for each unit of the good that is exported