Understanding Subsidies and their Impact on Markets

The video explains the concept of subsidies, their impact on supply and demand, and how they benefit both consumers and producers. It discusses examples like the UK rail industry and EU agriculture. The video also covers the cost of subsidies to governments and how these costs are calculated. The elasticity of demand plays a crucial role in determining the distribution of benefits between consumers and producers.

Explain how the elasticity of demand affects the distribution of subsidy benefits.

What is the overall cost of subsidies to the government, and how is it calculated?