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Subsidies definitions

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  • Subsidy
    Financial support from the government to market participants, increasing traded quantity and causing two distinct prices for buyers and sellers.
  • Deadweight Loss
    Inefficiency resulting from overtrading beyond equilibrium, where resources could be better allocated elsewhere.
  • Equilibrium
    Point where supply and demand curves intersect, determining the market price and quantity before government intervention.
  • Elasticity
    Measure of responsiveness in supply or demand to price changes, influencing how subsidy benefits are distributed.
  • Inelastic Demand
    Situation where consumers' quantity demanded changes little with price, leading to greater subsidy benefit for buyers.
  • Elastic Supply
    Condition where suppliers' quantity offered changes significantly with price, resulting in smaller subsidy benefit for sellers.
  • Inelastic Supply
    State where suppliers' quantity offered changes minimally with price, granting them a larger share of subsidy benefit.
  • Elastic Demand
    Scenario where consumers' quantity demanded changes greatly with price, causing buyers to receive less subsidy benefit.
  • Price Received
    Amount sellers obtain per unit after subsidy, higher than the price buyers pay due to government contribution.
  • Price Paid
    Amount buyers pay per unit after subsidy, lower than the price sellers receive because of government support.
  • Supply Curve
    Graphical representation of sellers' willingness to offer goods at various prices, shifting rightward with subsidies.
  • Demand Curve
    Graphical depiction of buyers' willingness to purchase goods at different prices, shifting rightward when subsidized.
  • Benefit Split
    Division of subsidy advantage between consumers and producers, determined by relative elasticities of supply and demand.
  • Overtrading
    Market activity exceeding equilibrium quantity due to subsidies, leading to inefficient resource allocation.
  • Government Contribution
    Financial amount provided by authorities, creating a gap between buyer and seller prices in subsidized markets.