Understanding Subsidies: Analyzing and Evaluating Government Intervention in Markets

The video tutorial explores the concept of subsidies as a form of government intervention in markets. It explains how subsidies can address market failures by reducing production costs, shifting supply curves, and increasing market output. The tutorial also covers the analysis of subsidies using economic models like demand and supply curves, as well as marginal cost and benefit frameworks. Real-life examples, such as social housing in the UK, illustrate the application of subsidies. The video concludes by discussing the challenges of subsidies, including costs, beneficiaries, and imperfect information.

How can the effectiveness of a subsidy be measured in terms of social welfare?

In what ways can subsidies lead to increased inequality in society?

What are the implications of imperfect information when implementing subsidies?

How do externalities affect the justification for subsidies?