ECON1002 Lecture Notes - Lecture 10: Australian Labor Party, Agricultural Supply Store, Child Care
Document Summary
Graphing subsidies: subsidies are essentially the opposite of a tax. Where a tax makes things artificially more expensive, a subsidy makes them artificially cheaper: as such, you can graph a subsidy as a reverse-tax, or you can graph taxes as a reverse subsidy. Imagine a market where supply is relatively more elastic than demand. The government introduces a subsidy paid to consumers. The price consumers pay falls to pc, stimulating a shift in demand. Producers increase supply commensurately because they now receive price pp. The benefit to consumers is the area below p* and above pc. While the benefit to producers is the area above p* and below pp. In its late 2018 national meeting, the australian labor party (alp) announced a new affordable housing scheme. Landlord"s who offer rental properties at 20% less than the market rate get : at first this might seem like a sophisticated subsidy, but it isn"t.
