Economics Welfare Economics Questions
A subsidy is a financial assistance or support provided by the government to individuals, businesses, or industries to encourage or promote certain economic activities. It is typically in the form of direct payments, tax breaks, or reduced costs for goods and services. The purpose of a subsidy is to make certain goods or services more affordable or accessible, stimulate economic growth, or correct market failures. Subsidies can be targeted towards specific sectors such as agriculture, education, healthcare, or renewable energy, and they can also be used to support low-income individuals or disadvantaged groups. However, subsidies can have both positive and negative effects on the economy, as they can lead to market distortions, inefficiencies, and fiscal burdens for the government.