Subsidy

A subsidy is a benefit given to an individual, business or institution, typically by the government. Subsidies are given to promote a social good or an economic policy. The government usually provides subsidies in the form of cash or tax breaks. Other forms of government subsidies are low-rate loans and certain types of rebates.Two of the most common types of individual subsidies are welfare payments and unemployment benefits.  The objective of these types of subsidies is to help people who are temporarily suffering economically.  Other subsidies, such as student loans, are given to encourage people to further their education.  Subsidies to businesses are given to support an industry that is struggling against international competition that has lowered prices, such that the domestic business is not profitable without the subsidy.  Farming is the best example of this type of subsidy.  Subsidies are given to farmers in the interest of helping them remain profitable. Economists and policy makers often debate the merits of subsidies.  Some economists argue that subsidies to particular industries are vital to help support businesses and the jobs they create.  Other economists feel the market should determine if a business survives or fails.  If it fails, those resources are allocated to a more efficient and profitable use. They argue that subsidies to these businesses simply sustain an inefficient allocation of resources.