Note on the Role of Subsidies in a Market Economy

by: Ted London

Publication Date: February 1, 2009
Length: 11 pages
Product ID#: 1-428-648

Core Disciplines: Base of the Pyramid, Economics, Social Impact

Partner Collection:

Available Documents

Click on any button below to view the available document.

Don't see the document you need? Don't See the Document You Need?
Make sure you are registered and/or logged in to our site to view product documents. Once registered & approved, faculty, staff, & course aggregators will have access to full inspection copies and teaching notes for any of our materials.


Need to make copies?

If you need to make copies, you MUST purchase the corresponding number of permissions, and you must own a single copy of the product.

Electronic Downloads are available immediately after purchase. "Quantity" reflects the number of copies you intend to use. Unauthorized distribution of these files is prohibited pursuant to term of use of this website.

Teaching Note

This product does not have a teaching note.


A review of the topic of subsidies yields a wide range of perspectives. Many economists believe that subsidies, when used appropriately, are helpful because they can encourage market development and a more equitable distribution of benefits and resources in society. Others disagree, believing that subsidies distort markets, create inefficiencies, and misallocate capital.Despite this lack of agreement, developing an understanding of what subsidies are and how they are used is important for managers. Subsidies can impact key strategic decisions, such as market entry, target consumers, production levels, pricing decisions, resource allocations, and financial forecasts. The purpose of this note is to 1) describe what subsidies are and why they are used, 2) examine subsidy types, 3) address the difference between recipients and beneficiaries, and 4) note some of the effects of subsidies on markets, the environment, and society.

Teaching Objectives

After reading and discussing the material, students should:

  • Define subsidies and explain how and why they are used.
  • Analyze the differences between beneficiaries and recipients.
  • Describe some of the effects of subsidies on markets, the environment, and society.