Overview
Per unit subsidies are crucial tools used by governments to support specific industries by lowering production costs for each unit produced. This financial aid encourages producers to increase supply, which can lead to lower prices for consumers and higher overall market activity. However, while sub...
Key Terms
Example: The government provided a subsidy to farmers to lower the cost of wheat production.
Example: An increase in subsidies shifts the supply curve to the right.
Example: Lower prices due to subsidies can lead to a rightward shift in the demand curve.
Example: Subsidies can lower the equilibrium price of goods.
Example: Subsidies increase consumer surplus by lowering prices.
Example: Subsidies increase producer surplus by raising their revenue.
Related Topics
Taxation
The process by which governments impose financial charges on individuals or businesses to fund public services.
intermediateMarket Failures
Situations where the allocation of goods and services is not efficient, often justifying government intervention.
intermediatePrice Controls
Government regulations that set the maximum or minimum price for a good or service.
intermediateKey Concepts
subsidymarket equilibriumconsumer surplusproducer surplus