economics subsidy project

Subsidies

A subsidy is essentially a simple idea; give a producer an incentive to produce more than they would normally do. The typical approach is to give the producer a certain amount of money per unit of production. The industry where this has been most obvious is in agriculture where the Common Agricultural Policy is held up as an excellent example of how subsidies can work but have numerous side effects, but the principle also extends to other areas - housing, for example. In the latter case, the problem of rising house prices means that many people just starting work or starting family life find it difficult to 'get on the housing ladder' because there is not much low cost housing available. Some councils have granted planning permission for new housing on the understanding that it is offered for sale for local people only and not at prices above a certain limit. Others are looking for a public subsidy to ensure that low cost housing is made available for those that need it.

When are subsidies appropriate?

The Common Agricultural Policy was devised in the years after the Second World War. The years were one of disruption, re-construction and shortage with rationing widespread. A key post-war strategy was to increase output of agricultural production and to attain a greater degree of self sufficiency in agricultural production. So with this example and that of housing quoted above we can conclude that the market failure is an insufficient amount produced to meet consumer need.

Choose an industry that has a subsidy: describe what the subsidy does and make sure you understand the good points and bad points.

• Understand the nature of a subsidy and how it affects a market
• Understand the incidence of a tax on producers and consumers in a market
• Understand the importance of price elasticity on the outcome of such interventions
• Show some appreciation of the long term implications of policy intervention

This is a presentation and is due FRIDAY!!!!!!!!!!!

Also we will be reading chapters 6 and 16 before the final exam so for the final you will need to know chapters 1-6 and 16 we are going to be watching the film The Corporation as well.

In Chapter 6 we will review

1.types of industrial activity
2.forms of business organizations
3.small and big businesses
4.financing and corporate expansion

Today I want you to understand the difference between:

primary industries
secondary industries
service industries

Here is a good slideshow overview of chapter 6

Also try this economics treasure hunt

And finally here is a practice quiz for what we will learn in chapter 6

And here is a link of corporation connections I want you to select One company and make a similar graph to the one shown here.