How do government subsidies aim to correct market failures related to externalities?

Government subsidies are financial support provided by the government to encourage certain activities that can benefit society. When there are externalities, like pollution or education, the costs or benefits of these activities are not reflected in the market prices, leading to market failures. For example, if a company pollutes a river, it might not pay for the damage it causes, so it produces more pollution than is socially acceptable. By offering subsidies to companies that reduce pollution or to students who attend school, the government helps align private incentives with social good. This way, subsidies can encourage positive behaviors and reduce negative externalities, making the market more efficient and fair for everyone.