Subsidies

Front

What is a producer subsidy?

Back

It is an amount given by the government to companies per unit.

Front

What is the purpose of subsidies?

Back

To increase production and the supply of high-quality goods.

Front

What happens to the supply curve when a subsidy is applied?

Back

The supply curve shifts from S to S + subsidy, increasing the quantity demanded (QD) from Q to Q'.

Front

What is the new equilibrium in the market after the implementation of subsidies?

Back

The price in the market P' decreases, and the quantity demanded (QD) increases.

Front

How is producer income calculated under the subsidy background?

Back

The formula for calculating producer income is P × Q.

Front

What does the area marked B in the figure represent?

Back

Subsidized producer share.

Front

What does the area marked A in the figure represent?

Back

Subsidized consumer share.

Front

What is the total cost of government subsidies?

Back

The total cost is (P - P') × Q, represented as area A + B.

Front

What is the important distinction between the interests of producers and consumers in a subsidy scenario?

Back

In a subsidy scenario, the interests of producers are represented in the upper part of the area, while the interests of consumers are in the lower part.

Front

How does price elasticity affect the distribution of subsidies?

Back

Producers retain part of the subsidy and pass the rest on to consumers at a lower price.