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Subsidies definitions

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  • Subsidy
    A government payment to market participants that increases traded quantity beyond equilibrium and alters prices for buyers and sellers.
  • Deadweight Loss
    A loss of total surplus caused by overtrading, where resources could have been better used elsewhere due to market distortion.
  • Equilibrium
    The market state where supply and demand intersect, determining the price and quantity before government intervention.
  • Elasticity of Demand
    A measure of how much buyers respond to price changes, influencing who benefits more from government payments.
  • Elasticity of Supply
    A measure of how much sellers respond to price changes, affecting the division of government-provided benefits.
  • Consumer Benefit
    The portion of government financial support received by buyers, determined by the relative responsiveness of demand.
  • Producer Benefit
    The share of government financial support received by sellers, depending on the responsiveness of supply.
  • Price Paid by Buyer
    The amount buyers spend after government support, typically lower than the amount sellers receive.
  • Price Received by Seller
    The amount sellers obtain after government support, usually higher than what buyers pay.
  • Supply Curve Shift
    A rightward movement representing increased market activity due to government financial support.
  • Demand Curve Shift
    A rightward movement indicating increased market activity from government financial support to buyers.
  • Tax Incidence
    The division of a financial burden or benefit between buyers and sellers, influenced by elasticity.
  • Overtrading
    A market outcome where more units are exchanged than at equilibrium, often resulting from government support.
  • Negative Tax
    A concept describing government payments that act as the opposite of a tax, increasing market activity.
  • Market Participant
    Any buyer or seller affected by government financial support, experiencing changes in prices and traded quantities.