Subsidies

Instructor: Alex Tabarrok, George Mason University

What is a subsidy? A subsidy is really just a negative or reverse tax. Instead of collecting money in the form of a tax, the government gives money to consumer or

What is a subsidy? A subsidy is really just a negative or reverse tax. Instead of collecting money in the form of a tax, the government gives money to consumer or producers. In this video, we look at the subsidy wedge and who benefits the most from different subsidies.

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user's picture

Basic assumption made by supply and demand curve is "everything else remains the same". Economic/financial environment in China is changing. People are getting richer and access to finance is getting easier. So they can afford to buy expensive luxury goods. If the economy is getting poorer even if the price falls, demand will also fall.

user's picture

haha, I guess the rise of price for a bag from 100 to 150 will probably stop some people from buying it, but people value things differently and their trade offs are different, Some people will probably have McD.for 1 month to save money for a luxury bag, while others prefer to have healty meal everyday rather than a luxury bag.. Also for very rich people, rise in price won't bother them at all.

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