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What is a subsidy?
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Quick answer
A subsidy is financial support — usually from a government — given to lower the cost of a good, service, or activity. It's used to make essentials more affordable or to encourage things society wants more of, like clean energy or farming.
Key things to understand
- It's money or a tax break that reduces the cost of producing or buying something.
- Governments use subsidies to support industries, lower prices, or steer behavior.
- Common examples include farming, fuel, healthcare, education, and renewable energy.
- Supporters say they protect essentials and jobs; critics say they can distort markets.
- They're the flip side of taxes, which raise the cost of things instead.
People also ask
Why do governments give subsidies?
To make essential goods affordable, support strategic industries or jobs, and encourage activities with broad benefits — such as clean energy or food production.
What's the downside of subsidies?
They cost public money and can distort markets — propping up inefficient producers or encouraging overuse — which is why they're often debated.
How is a subsidy different from a tariff?
A subsidy lowers the cost of something (encouraging more of it); a tariff is a tax that raises the cost of imports (discouraging them). They pull in opposite directions.