What Does Subsidy Mean? (Solution found)

What is the purpose of a subsidy?

  • A subsidy or government incentive is a form of financial aid or support extended to an economic sector (or institution, business, or individual) generally with the aim of promoting economic and social policy.

What is a subsidy in simple terms?

A subsidy is a benefit given to an individual, business, or institution, usually by the government. The subsidy is typically given to remove some type of burden, and it is often considered to be in the overall interest of the public, given to promote a social good or an economic policy.

What is subsidy with example?

Definition: Subsidy is a transfer of money from the government to an entity. It leads to a fall in the price of the subsidised product. It is a part of non-plan expenditure of the government. Major subsidies in India are petroleum subsidy, fertiliser subsidy, food subsidy, interest subsidy, etc.

Does subsidized mean free?

Meaning of subsidized in English that is partly paid for by the government or an organization: A subsidized canteen and interest free season-ticket loans are additional benefits.

How does a subsidy work?

Government subsidies help an industry by paying for part of the cost of the production of a good or service by offering tax credits or reimbursements or by paying for part of the cost a consumer would pay to purchase a good or service.

Is subsidy a loan?

Subsidy can be availed on home loans that were approved on or after 1 January 2017. Applicants who fall under MIG – I category can avail subsidy at the rate of 4% with the maximum loan amount being Rs. 9 lakh. The maximum loan term taken into consideration for calculation of subsidy is 20 years.

Do you have to pay back subsidy?

For 2020, excess subsidies do not have to be repaid. And for 2021 and 2022 only, the ARP allows people with income above 400% of the poverty level to qualify for premium subsidies.

What is a subsidy loan?

The term subsidy refers to the financial assistance in the form of discount or monetary grants by the Central government to public entities or private institutions. The objective is to make the products offered by these institutions affordable for public consumption.

Is a tax credit a subsidy?

First of all, the premium subsidy is a refundable tax credit, which means you can receive it even if you have no tax liability; the credit reduces the total amount of taxes you have to pay, and can even take your total tax liability below zero (ie, in the form of a refund).

Why subsidy is given?

Basically, subsidies are provided by the government to specific industries with the aim of keeping the prices of products and services low for people to be able to afford them and also to encourage production and consumption.

Why are subsidies bad for the economy?

By aiding particular businesses and industries, subsidies put other businesses and industries at a disadvantage. This market distortion generates losses to the economy that are not easily seen and thus generally aren’t considered by policymakers.

What do you mean by incentives and subsidies?

The term “incentive’, generally means encouraging productivity. It is a motivational force, which encourages an entrepreneur to take a right decision and act upon it. “Subsidy” means a single lump sum of money that is given by a Government to an entrepreneur to cover the cost.

Who benefits from a subsidy to buyers?

Who benefits from a subsidy paid to buyers? a subsidy paid to buyers benefits both sides of the market. Buyers pay less and sellers receive more for each unit sold.

What is the effect of a subsidy being placed on the market?

A subsidy generally affects a market by reducing the price paid by buyers and increasing the quantity sold. Subsidies are usually pareto inefficient because they cost more than they deliver in benefits.

Subsidy Definition

A subsidy is a benefit that is provided to an individual, business, or institution, and is generally provided by the federal government. It can be either direct (as in cash payments) or indirect (as in credit card payments) (such astax breaks). It is customary for a subsidy to be provided in order to relieve some form of burden, and it is frequently deemed to be in the general public’s best interests when it is provided to promote a social good or an economic policy.

Key Takeaways

  • A subsidy is a direct or indirect payment made to individuals or businesses by the government, which is typically in the form of a cash transfer or a targeted tax reduction. Subsidies, according to economic theory, can be used to compensate for market failures and externalities in order to achieve higher economic efficiency. But opponents of subsidies point to difficulties in estimating appropriate subsidies, dealing with unexpected expenses, and avoiding political incentives from making subsidies more costly than they are useful.

Understanding Subsidy

A subsidy is typically some type of payment made to an individual or corporate organization that is receiving it, whether it is delivered directly or indirectly. Subsidies are often regarded as a special sort of financial assistance because they relieve the recipient of an associated burden that had previously been imposed on him or her, or because they encourage a certain conduct by giving financial support. Subsidies have an opportunity cost associated with them. Consider the agricultural subsidies provided during the Great Depression: it had highly apparent impacts, with farmers reporting increased earnings and the hiring of extra staff.

Money from the subsidies had to be deducted from individual income tax returns, and customers were stung a second time when food costs rose at the supermarket.

Types of Subsidies

Subsidies are often used to benefit specific sectors of a country’s economy. If it can alleviate the pressures put on faltering sectors, it can also promote new advances by giving financial assistance for their initiatives. Frequently, these regions are not adequately supported by the operations of the main economy, and they may even be undermined by activity in other economies.

Direct vs. Indirect Subsidies

Direct subsidies are those that entail the direct payment of monies to a specific individual, organization, or industry. They are also known as direct payments. Those that have no preset monetary value or that do not entail real financial outlays are referred to as indirect subsidies. They can include initiatives like as price reductions for essential products and services, which can be funded by the government, among other things. This permits the necessary commodities to be acquired at a lower cost than the current market rate, resulting in savings for individuals who are intended to benefit from the subsidy.

Government Subsidies

The government provides a wide range of subsidies to a wide range of industries. Individual subsidies include welfare payments and unemployment benefits, which are two of the most popular kinds of financial assistance. The purpose of these forms of subsidies is to provide assistance to persons who are experiencing temporary economic hardship. People are encouraged to continue their education via the use of other incentives such as discounted interest rates on student loans and other forms of financial assistance.

These subsidies are intended to reduce the amount of money that people have to pay out of pocket for insurance premiums.

Subsidies to companies are provided to assist a sector that is failing to compete against worldwide competition that has reduced prices to the point where the local firm would be unprofitable without the subsidy.

History has shown that agricultural subsidies, financial institutions subsidies, oil company subsidies, and utility company subsidies have accounted for the great bulk of subsidies in the United States.

Advantages and Disadvantages of Subsidies

Public subsidies are justified on a variety of grounds: some are economic in nature, others are political in nature, and still others derive from socio-economic development theories. In accordance with development theory, certain industries require protection from foreign competition in order to maximize domestic advantage. Technically speaking, a free market economy is one that is devoid of subsidies; the introduction of a subsidy changes a free market economy into a mixed economy. Economics and politicians frequently dispute the advantages of government subsidies, and by extension the extent to which a mixed economy should be allowed to exist in a given country.


Pro-subsidy Economists say that providing subsidies to certain industries is essential for assisting in the support of firms and the employment they produce. The mixed economy is supported by economists who think that subsidies are justified in order to offer the socially optimal level of goods and services, which will lead to economic efficiency as a result of the mixed economy. In modern neoclassical economic models, there are instances in which the real supply of an item or service goes below the theoreticalequilibriumlevel, resulting in an undesired shortage and what economists refer to as a market failure.

  1. The subsidy decreases the cost of bringing the item or service to market for the producers who receive it.
  2. In other words, according to general equilibrium theory, subsidies are required when a market failure results in an insufficient amount of output in a particular area of the country.
  3. Some claim that commodities or services produce what economists refer to as “positive externalities,” which are beneficial to the economy.
  4. However, because the third party is not a direct participant in the decision, the activity will only take place to the degree that it directly helps those who are directly engaged, leaving potential societal benefits on the table as a result of this.
  5. The inverse of this type of subsidy is the imposition of a charge on activities that generate negative externalities.

This is a common approach that is now being used in China and other South American countries.


Other economists, on the other hand, believe that free market forces should determine whether a company survives or fails. Even if it fails, the resources are redeployed to a more efficient and lucrative application. It is their contention that subsidies to these enterprises just serve to maintain an inefficient allocation of scarce resources. Subsidies are viewed with suspicion by free market economists for a variety of reasons. Many people believe that government subsidies needlessly distort markets, limiting efficient results and diverting resources away from more productive applications and onto less productive ones.

  1. Official expenditure on subsidies, according to some critics, is never as successful as government predictions indicate it would be.
  2. Another issue, as critics point out, is that the act of subsidizing contributes to the corruption of the democratic process.
  3. Companies frequently seek protection from the government in order to protect themselves from competition.
  4. Even if a subsidy is introduced with the best of intentions, without any hint of conspiracy or self-interest, it increases the earnings of those who benefit from it, creating an incentive to fight for its continuation long after the necessity or utility of the subsidy has passed.
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Special Considerations

There are a number of different metrics that may be used to assess the success of government subsidies. Most economists regard a subsidy to be a failure if it does not result in a general improvement in the economy. Policymakers, on the other hand, may still deem it a success if it aids in the achievement of a different goal. Despite the fact that most subsidies are long-term failures in the economic sense, they nonetheless accomplish cultural or political objectives. When it comes to the Great Depression, we may see an illustration of these opposing assessments.

  1. Their policy objective was to keep food prices from dropping further and to safeguard small farmers from being harmed.
  2. However, the economic ramifications were completely different.
  3. Those who did not work in the agricultural business fared badly in terms of absolute economic well-being.
  4. Subventions for renewable (non-oil-based) energy sources totaled more than $60 billion in the United States Department of Energy (DOE) fiscal years 2012 and 2013.
  5. The receiving firms, on the other hand, were unable to generate a profit, and oil prices fell in 2014.

People who directly or indirectly benefit from subsidies tend to be the greatest supporters of them, and the political motivation to “bring home the bacon” to ensure support from special interests is a potent magnet for politicians and policymakers alike to support them.

Wha is the difference between direct and indirect subsidies?

Direct subsidies are those that entail the direct payment of monies to a specific individual, organization, or industry. They are also known as direct payments. Those that have no preset monetary value or that do not entail real financial outlays are referred to as indirect subsidies. These can include efforts like as price reductions for essential products and services, which can be funded by the government in some cases.

What is the position of subsidy advocates?

Subsidies are available in mixed-income societies. Proponents say that providing subsidies to certain industries is critical to assisting in the support of businesses and the employment they generate. They also argue that subsidies are appropriate in order to offer the socially optimal level of goods and services, which will result in greater economic efficiency in the long run.

What is the position of subsidy opponents?

Subsidies are prohibited in a free market economy, at least on a technical level. If a firm survives or fails, opponents of government subsidies believe that market forces should be the determining factor. If it fails, those resources will be redistributed to a more efficient and profitable use in the future. They contend that subsidies unduly distort markets by diverting resources away from more productive applications and onto less productive ones, so preventing efficient outcomes from occurring.

Definition of SUBSIDY

The city is boosting the amount of money it spends on public transportation. In the event of a crop failure, the government provides subsidies to farmers. Recent Web-based illustrations The Australian federal government will provide a subsidy to the series in the amount of $11.5 million (A$16 million). —Patrick Frater, in Variety on January 24, 2022. According to the school, its level of institutional assistance, which was $42.6 million of a $47.2 million subsidy in FY2021, is expected to decline to $33.6 million in FY2022, from $42.6 million in FY2021.

  1. —Noah Millman, The Week, December 12, 2021.
  2. Casey Mulligan, Wall Street Journal, 9 December 2021 This perk is predicted to cost the taxpayers $22 billion a year in subsidies.
  3. theBostonGlobe.com, August 15, 2021 Owners are signing up for retrofits without the assistance of the government as a result of the significant energy savings (although a solarsubsidyis available).
  4. The average monthly rent subsidy provided by a voucher is $650, allowing low-income families to live in better-quality homes while maintaining their financial stability.

It is not the opinion of Merriam-Webster or its editors that the viewpoints stated in the examples are correct. Please provide comments.

Definition of SUBSIDIZE

Housing for low-income households is subsidized by the state. She believes that taxpayers should not support the activities of private enterprises. Employees’ health insurance premiums are subsidized by the firm. Recent Web-based illustrations The disagreement is about whether the individual who obtains the degree should bear the financial burden of those expenses via their own personal sacrifice, or if other Americans who have already paid off student loans or who did not attend college should support your education.

  1. •Annalisa Merelli, Quartz, 2nd of December, 2102 Community college is one of the least costly options available, with an estimated $120 billion in costs over a ten-year period, and many states currently fund it.
  2. —Washington Post, published on October 5, 2021 The lower the cost of the tests, the greater the likelihood that the government will fund them and that customers will purchase them for routine testing.
  3. Even while taxpayers are not directly responsible for the premiums for retirees, according to the audit, they do subsidize them.
  4. It is not necessary to subsidize what has traditionally been done as a solution to the problem.
  5. It is not the opinion of Merriam-Webster or its editors that the viewpoints stated in the examples are correct.

Definition of subsidy

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This indicates the grade level of the word based on its difficulty. / sb s d I / sb s d I This indicates the grade level of the word based on its difficulty. noun,pluralsub·si·dies. a direct financial assistance provided by a government to a private industrial endeavor, a charitable organization, or other such institution a quantity of money given by one government to another, usually in compliance with a treaty, in order to get some service in exchange a financial gift or commitment of funds money that was previously provided to the crown by the English Parliament for certain purposes EVALUATE YOUR KNOWLEDGE OF AFFECT AND EFFECT VERSUS AFFECT!

In effect, this exam will determine whether or not you possess the necessary abilities to distinguish between the terms “affect” and “effect.” Despite the wet weather, I was in high spirits on the day of my graduation celebrations.

Origin ofsubsidy

It was first reported in 1325–75; Middle English subsidie, from Anglo-French subsidium, from Latin subsidium “auxiliary power, reserve, or assistance,” corresponding to the prefix sub-sub-+sid-, a combining form ofsedre “to sit”; first attested in 1325–75. (seesit 1) +-ium-ium

synonym study for subsidy

1.Subsidy and subsidy are both financial assistance provided to private enterprises by governments, often in the form of grants of money. When a subsidy is provided, it is normally to encourage commercial business, such as a subsidy to manufacturers during a war. A subvention is often a grant given to businesses that are associated with science and the arts, such as a grant given to a research chemist by a prominent corporation.


An·ti·sub·si·dy,noun,pluralan·ti·sub·si·dies. non·sub·si·dy,noun,pluralnon·sub·si·dies.

Words nearbysubsidy

Subsidiary coin, subsidiary company, subsidiary ledger, subsidiary rights, subsidize, subsidy, subsist, subsistence, subsistence allowance, subsistence farming, subsistence level, subsidized coin, subsidised coin, subsidised coin, subsidised coin, subsidised coin, subsidised coin, subsidised coin, subsidised coin, subsidised coin, subsidised coin, subsidised coin Dictionary.com Unabridged Random House, Inc.

  • 2022, based on the Random House Unabridged Dictionary, Random House, Inc. A It is a direct payment provided by a government to a firm or other organization in the form of support to those organizations and companies.
  • State and local governments that offer subsidies frequently target them towards certain industries, such as farming.
  • More broadly, the term “subsidy” can apply to any gift or monetary contribution of any kind.
  • Using the above example, my firm was awarded a government subsidy to assist in expediting the manufacture of healthcare items.

Where doessubsidycome from?

The oldest written mention of the word subsidy dates back to the 1300s. It ultimately stems from the Latin term subsidium, which means “auxiliary power,” “reserve,” or “assistance” in English. As a general rule, subsidies are intended to assist in the provision of funding to enterprises in a certain industry, with the purpose of assisting that industry in thriving—so that it can create employment or otherwise drive economic growth. Subsidies come in a variety of forms, although the term is most commonly linked with payments made by the government.

The United States government provides subsidies to a wide range of businesses, including fossil fuel firms, military contractors, and automotive manufacturers.

How issubsidyused in real life?

Is the word subsidy properly used in the following sentence?

These subsidies may benefit multibillion-dollar firms, but we should examine if they benefit ordinary individuals as well.

Words related tosubsidy

Aid, allowance, appropriation, assistance, bonus, contribution, endowment, financial aid, gift, grant, payment, pension, premium, scholarship, support, alimony, bequest, bounty, fellowship, and gratuity are all terms that can be used to describe financial help.

How to usesubsidyin a sentence

  • State and municipal governments have provided Amazon with approximately $3 billion in subsidies in total. She implemented a company-wide 30 percent wage cut on around 120 employees in July, despite the fact that she had received tax breaks and employment subsidies from the government intended to assist businesses in surviving the epidemic. It’s essentially about government subsidization and cost management, which is something we’ve never done before in this nation. If the state subsidy does not cover the entire cost of the treatment, there may be a co-pay.
  • The rule offering free garbage collection to single-family houses is primarily a subsidy for homeowners, despite the fact that some rich condo owners are barred from receiving the service and some low-income individuals benefit from it. Welfare expenditure deters people from working, raises taxes, and serves as a covert and wasteful subsidy to low-wage firms, among other things. Another way of putting it is that this subsidy provides the United States with clout over the decision-making of a vital ally. We must devise a method of financial support that will allow music and parallel arts to flourish without fear of repercussions. The ownership, operation, regulation, and subsidization of schools and colleges by the government should be phased out
  • Increased premiums might be passed on to customers, and increased subsidy expenses could be passed on to taxpayers. In light of Frederick’s refusal to make any commitments on the circumstances on which he would make peace, the British government declined to provide the subsidies. We may receive another subsidy from the House of Commons, which will make ae accounting of it easier
  • “Yes,” the diplomat said, “and he is the only one among them who does not want any subsidies
  • ” You can refer to it as a subsidy or an imperial contribution
  • But, it is not a benefit because the recipient cannot think about it without feeling embarrassed. The history of the subsidy provides valuable insight into the trends in direct taxes in all nations.
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British Dictionary definitions forsubsidy

The term refers to financial assistance provided by a government to industry for reasons of public well-being, the balance of payments, or other considerations. History of the English language financial transfer to the Crown made by Parliament initially for specific purposesany monetary contribution, grant, or help provided by an individual or organization

Word Origin forsubsidy

The term “subsidie” comes from the Anglo-Norman “subsidie,” which comes from the Latin “subsidiumassistance,” and the verb “subsidre” means “to stay.” Complete Unabridged Digital Edition of the Collins English Dictionary, published in 2012. William Collins Sons Co. Ltd. was established in 1979 and 1986. In 1998, HarperCollinsPublishers published the following books: 2000, 2003, 2005, 2006, 2007, 2009, and 2012.

Cultural definitions forsubsidy

A grant given by a government to a person or company in order to maintain a reasonable quality of life or to foster economic growth is known as a social grant. The Third Edition of The New Dictionary of Cultural Literacy is now available. Houghton Mifflin Harcourt Publishing Company acquired the copyright in 2005. Houghton Mifflin Harcourt Publishing Company is the publisher of this book. All intellectual property rights are retained.


In addition to the United States, several other nations are grappling with energy subsidies. In order to enhance rent income while decreasing subsidies, a building might have both market-rate and affordable units. If you want to do so, you can maintain your service pricing the same as it is currently while still receiving the phone subsidy. In addition, I discuss how the old subsidymodel has been reducing carrier earnings over the years. As a result, additional subsidies will be demanded in the future.

Fossil fuels received around $550 billion in worldwide subsidies in 2013, falsely decreasing consumer prices and making it more difficult for renewable energy to compete on a global scale.

Housing subsidies, on the other hand, kept 2.8 million individuals out of poverty in the past year.

The enforcement of competition laws will ensure that subsidies are well-designed and cost-effective in their implementation.

These samples are drawn from corpora as well as from other online sources. Any viewpoints expressed in the examples do not necessarily reflect the views of the Cambridge Dictionary editors, Cambridge University Press, or its licensors, who are not represented by the examples.

Am I eligible for a health insurance subsidy?

Everyone is required to obtain health insurance under the Affordable Care Act, with a few exceptions. You are covered if you have health insurance via your employment or are qualified for government programs such as Medicare or Medicaid. If you don’t have health insurance, you’ll have to get it on your own. If you don’t, you’ll be subject to a penalty. Do you already cover the cost of your own health insurance? Do you want to go shopping for the first time? In any case, the good news is that you may be eligible for financial assistance in the form of individual health insurance.

What’s a subsidy?

A subsidy is a form of financial aid that is used to assist you in paying for something. It is not a loan, and you are not required to repay it. Individual health insurance plans are eligible for two types of federal subsidies, both of which are provided by the federal government.

  • It is possible to decrease your monthly health insurance payment, or premium, with the Advanced Premium Tax Credit. The Cost Sharing Reduction program lowers the amount of money you have to pay out of pocket for health care services you get during a policy period (typically a year). It contains your deductible, coinsurance, and copays, all of which add up to your out-of-pocket limit
  • It also includes your copayments.

When you purchase your health insurance plan, you will be required to complete an application for a subsidy.

Can I get a subsidy?

It is dependent on the following factors:

  • What your income looks like in relation to the Federal Poverty Level
  • The number of people in your family
  • What your health insurance premiums are where you reside

Your money is the most important element. If your household income is up to four times the Federal Poverty Level, you may be eligible for a subsidy. That equates to around $47,000 for an individual and $97,000 for a household of four people. If you’re an individual with a household income of around $29,000 or less, or a family of four with a household income of approximately $60,000 or less, you may be eligible for both subsidies. It is your responsibility to record any subsidies received when you file your tax returns.

When you’re searching for insurance, you may check to see whether you qualify for cheaper premiums or discounts.


A subsidy is a financial or tax benefit provided by the government to individuals or enterprises in the form of cash, grants, or tax breaks, among other things. Direct Taxes A direct tax is a form of tax that an individual pays to the government that is paid directly to the government. Examples of direct taxes include income tax, poll tax, property tax, and tax credits that help to increase the supply of specific goods and services. Subsidies enable customers to obtain lower-priced goods and services by reducing competition.

Externality An externality is a cost or benefit of an economic activity that is experienced by a third party that is not involved in the economic activity.

Fiscal Policy is a term that is used to refer to a set of rules that govern how money is spent.

Essentially, subsidies are financial assistance provided by the government to certain businesses with the goal of keeping the prices of goods and services low so that consumers can afford them while simultaneously encouraging the production and use of such goods and services.

Types of Subsidies

This form of subsidy is offered in order to stimulate the development of a certain product or service. In order for manufacturers to raise their production output, the government pays them for some of the costs associated with doing so. This allows them to reduce their costs while simultaneously raising their output. As a consequence, both output and consumption increase, but the price remains stable or slightly higher. The disadvantage of such an incentive is that it has the potential to encourage overproduction.

2. Consumption subsidy

This occurs when the government provides financial assistance to cover the costs of food, education, healthcare, and water.

3. Export subsidy

A well-known truth is that a country or state makes money from its exports, and that exports contribute to the overall health of the economy. As a result, the government subsidizes the cost of exports in order to encourage them. However, this may be readily misused, particularly by exporters who inflate the cost of their goods in order to earn a higher incentive, so increasing their profits at the expense of taxpayers and ultimately rising their overall profits.

4. Employment subsidy

This tax credit is provided by the government to businesses and organizations in order to encourage them to create additional job possibilities for their employees.

Advantages of Subsidies

They are particularly useful in the area of production cost inputs such as fuel costs, which is particularly relevant at a time when global crude oil prices are on the rise. Fuel expenses are heavily subsidized in many nations in order to keep prices from skyrocketing.

2. Preventing the long-term decline of industries

There are several businesses that should be maintained alive and functional, such as fishing and farming, because they are critical to the survival of a society’s inhabitants. Many emerging and rapidly expanding sectors may also benefit from government support.

3. A greater supply of goods

There are several businesses that should be maintained alive and functional, such as fishing and farming, because they are critical to the survival of a society. Subsidies may also be beneficial to many emerging and rapidly expanding sectors.

Disadvantages of Subsidies

Despite the fact that one of the benefits of subsidies is an increased supply of products, a scarcity of items can also emerge as a result of subsidies. This is due to the fact that decreased pricing might result in a rapid increase in demand, which many companies may find extremely difficult to satisfy. In the end, it might result in a significant increase in demand, which in turn produces a rise in prices.

2. Difficulty in measuring success

Subsidies are usually effective and helpful. However, if the government were to issue a report on its success in employing subsidies, it would be a different story. This is because it is hard to measure the success of subsidies.

3. Higher taxes

Most of the time, subsidies are useful and beneficial. However, if the government were to publish a report on the success it has had in utilizing subsidies, the story would be quite different. This is due to the fact that it is difficult to assess the effectiveness of subsidies.

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  • Loss of Deadweight Loss of Deadweight In economics, deadweight loss refers to the reduction in economic efficiency that occurs when the ideal level of supply and demand is not reached. To put it another way, it is
  • Supply and demand are two sides of the same coin. Supply and demand are two sides of the same coin. The rules of supply and demand are microeconomic ideas that assert that in efficient markets, the amount of an item provided and the quantity demanded are equal. Externality Externality An externality is a cost or benefit of an economic activity that is experienced by a third party that is not involved in the economic activity. Although the external cost or benefit is not included, The Influence of a Network The Influence of a Network Generally speaking, the Network Effect is a phenomena in which current consumers of a product or service gain in some manner when the product or service is adopted by more users. Several users contribute to the creation of this impact when they bring value to their use of a particular product. In the case of the Internet, it is the greatest and most well-known example of a network effect.
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When a government grants a subsidy, it is either a direct payment or an indirect payment in the form of an economic concession or privilege to private businesses, families, or other government-sponsored entities in order to achieve a public aim. The identification of a subsidy is sometimes difficult due to the wide range of subsidy instruments available, the diversity of the aims they are intended to serve, and the complexity of their impact on the economy. Various government-sponsored programs in the areas of transportation, housing, agriculture, mining, and other sectors have been established on the basis that the maintenance or extension of these businesses, even at the expense of the general population, is in the public’s interest.

  1. Grants of money or other assistance granted by a central government to a local authority in order to achieve objectives in which the central government has an interest are also included in this definition (e.g.,grants-in-aid).
  2. It doesn’t matter what shape subsidies take; their goal is always the same: to shift the outcomes of otherwise free markets and unhindered competition in a direction that is more compatible with the aims of public policy.
  3. Subsidies have been around for a long time in all countries.
  4. Many people have expressed doubt about protectionist theories in the past.
  5. A comprehensive economic planning system takes the role of the subsidy device in countries where the central government exerts significant control over the pricing and production practices of domestic companies.
  6. Aside from that, there are a variety of government measures that have subsidy effects, such as regulatory statutes that soften the full force of competition, rules that compel the purchase of goods fromfavored manufacturers or countries, and protective wage and price legislation.
  7. Direct subsidies have historically been the most extensively employed method of promoting the development of the transportation sector in general.

Indirect subsidies are created when governments purchase directly from private producers at prices that are higher than the market price, maintain higher prices through market manipulation, provide services to private enterprises at prices that are lower than the cost of providing the service, or grant special tax concessions to businesses.

Furthermore, they may serve to support the survival of inefficient producers.

It is necessary to weigh the advantages of a subsidy (which are typically diffuse and difficult to quantify) against the costs of the subsidy, which include increased prices, higher taxes, and inefficiency to determine whether or not the subsidy is desirable.

Subsidies Definition (6 Examples and 2 Types) – BoyceWire

Written by Paul Boyce and last updated on October 31, 2020 Generally speaking, subsidies are a method through which governments provide money to private companies in order to keep prices low or to safeguard the business and its employees. This might be accomplished by a monetary contribution or through a specific tax reduction. Subsidies are classified into two categories: direct subsidies and indirect subsidies. Direct payments, for example, are made when the government distributes money directly to a company’s account.

Direct subsidies such as government-backed loans or ‘payments in kind’ might be considered to be a sort of indirect subsidy.

  1. Paid by the government to safeguard jobs and/or keep the prices of final goods low, subsidies are a type of aid. Subsidies are classified into two categories: indirect and direct. When it comes to subsidies, critics point out that they are an inefficient use of resources and that they might lead to perverse incentives — as in the case of dairy production in the United States.

Paid by the government to safeguard jobs and/or keep the price of final goods low, subsidies are a type of assistance. The terms “indirect” and “direct” refer to the two forms of subsidies. When it comes to subsidizing agriculture, critics point out that it is an inefficient use of resources and that it can generate perverse incentives, as in the case of dairy production in the United States.


  • 1A quantity of money awarded by the state or a public entity to an industry or business in order to assist them in keeping the price of a product or a service as low as possible.
  • The state or a public entity provides a quantity of money to an industry or business in order to assist them in keeping the price of a product or service low.
  1. 1A quantity of money awarded by the state or a public entity to an industry or business in order to assist them in keeping the price of a commodity or service as low as possible.
  • In a period of cuts in the post-war Welfare State, withdrawal of state subsidies and support, and low public expenditure, the arts were able to flourish.’
  • ‘The fact is that private and corporate money has surpassed public subsidy in festival funding.’
  • ‘Some projects rely on public subsidies to fund even their core activities.’
  • ‘The centre also manages support programmes for people with disabilities as well as providing direct financial assistance.’ To support ticket subsidies for school children and senior citizens to attend area performances and exhibitions
  • ‘For everything else, they are reducing the public subsidy.’
  • ‘In attempting to make their public subsidy of culture more responsive to modern cultural tastes, the current government is accused of ‘plebeianism. “
  • ‘By the conclusion of the franchise, which will include more than 2,000 services, the total amount of public subsidies will be £2.43 billion.’
  • It is recommended that you utilize public transportation and advocate for public subsidies for it. For example, “Railtrack has been obliged to honor its obligations to railroad customers — kind of — but only after the government threatened to purchase an equity share in exchange for public subsidies.” As a result of public subsidies, Scotland is currently experiencing a ‘wind rush,’ with developers ready to build a network of up to 70 wind farms across the nation.

Funds, assets, money, capital, resources, cash, wealth, reserves, wherewithal, revenue, income, and stock are all terms that can be used to describe financial resources. View a list of synonyms 1.2A financial gift or contribution of funds. ‘the employment is well compensated, and perks include a mortgage assistance,’ says the employer.

  • As a result of the cessation of Soviet subsidies, ‘the country’s economy is on the verge of collapse.’ Other proposals include providing subsidies to strengthen security and equipping post offices with computers so that consumers may use the internet. Mortgage subsidies are also available to members through the Defense Home Owners Scheme.’
  • ‘Immigrants were able to purchase 25-acre parcels at relatively low interest rates, with a variety of subsidies also available.’ It is not through words but through acts that we will overcome this gap
  • Not through subsidies but through investment
  • Not through rhetoric, but through technology. The Veterans Administration also provided mortgage discounts, which enabled veterans to purchase homes with reasonable ease.

Grant, allowance, endowment, contribution, donation, bursary, gift, present, investment, bestowal, benefaction, allocation, allotment, and handout are all terms that can be used to describe monetary compensation. View a list of synonyms 2historical A parliamentary donation to the sovereign for the purpose of meeting state requirements. ‘In exchange for supplying subsidies, Parliament asked that the monarchy grant it ever-increasing powers.’

  • In addition, the war’s financial burden was unprecedented in English history: even with parliamentary subsidies, it could only be paid by borrowing and the sale of Crown properties. Thus, even though the debts of the Irish government represented a drop in the ocean of English public finance, they were required to be covered by Irish legislative subsidies.
  1. In addition, the war’s financial burden was unprecedented in English history: even with parliamentary subsidies, it could only be paid by borrowing and the sale of crown properties. Thus, even though the debts of the Irish government represented a drop in the ocean of English public finance, they were required to be covered by Irish legislative subsidies.’
  • It was argued that this strategy was overly bureaucratic and that an alternative model, in which individuals would be given tax credits and other incentives to purchase their own insurance, would be preferable.
  • ‘First and foremost, he believed that, given the high rents in many communities, the lower-middle class deserved some tax breaks.’
  • ‘Many expatriate pensioners are unaware that housing and council tax subsidies, as well as disability benefits, are not payable outside the United Kingdom.’
  • ‘The EU is also set to levy up to $4 billion in tariff increases on US products in a dispute over tax subsidies to foreign sales of US corporations.’


Anglo-Norman influence on late Middle English French subsidie is derived from the Latin subsidium, which means ‘help.’

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