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Unit 4 - Lesson 5
Learning Outcomes:
● Define all terms in orange bold in section 4.4. (AO1)
● Explain the consequences of subsidies on markets and stakeholders. (AO2)
● Draw diagrams to illustrate the effects of subsidies on markets and
stakeholders. (AO4)
● Evaluate the effects of subsidies on markets and stakeholders. (AO3)
Introduction to Subsidies
Subsidy:
No subsidy Subsidy
Quantity Qe Q1
Impact to Consumers
Price Pe Pc Decrease
Quantity Qe Q1 Increase
Consumer Pe X Qe Pc X Q1 Decrease
Expenditure
Impact on Consumers:
Quantity Qe Q1 Increase
Producer Pe X Qe Pp X Q1 Increase
Revenue
Impact on Producers:
Impact on Producers
Impact on Workers
Foreign Producers