Subsidy

In economics, a subsidy is generally a monetary grant given by government to lower the price faced by producers or consumers of a good, generally because it is considered to be in the public interest. Sometimes, the term subsidy may also refer to assistance granted by others, such as individuals or non-government institutions, although this is more usually described as charity. A subsidy normally exemplifies the opposite of a tax, but can also be given using a reduction of the tax burden. These kinds of subsidy are generally called tax expenditures or tax breaks.

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Subsidies protect the consumer from paying the full price of the good consumed, however they also prevent the consumer from receiving the full value of the thing not consumed – in that sense, a subsidized society is a consumption society because it unfairly encourages consumption more than conservation. Under free-market conditions, consumers would make choices which optimize the value of their transactions; where it were less expensive to conserve, they would conserve. In a subsidy economy however, consumers are denied the benefit of conservation and as a result, subsidized goods have an artificially higher value than expenditures which do not consume. Subsidies are paid for by taxation which creates a deadweight loss for that activity which is taxed.

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Economics: Economics (from the Greek οίκος , 'house', and νομος , 'rule', hence "household management") is a social science that studies the production, distribution, trade and consumption of goods and services. Economics is said to be positive when it tries...

Government: A government is the body that has the power to make and enforce laws within an organization or group. In its broadest sense, "govern" means the power to administrate, whether over an area of land, a set group of people, or a collection of assets. The word government is derived the Greek Κυ...

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