The purpose of government subsidies is to encourage activities that are deemed to have positive spillovers. A professional sports team, for example, is thought to increase tax revenues and increased demand for local businesses.
Choose to discuss another good or service for which government provides a subsidy. Include each of the following in your initial post.
1. Describe the subsidy program and explain what spillovers are generated from the subsidy.
2. Explain how both consumer and producer surplus will be affected by the subsidy. Will they increase or decrease?
3. Who are the winners (i.e. increased surplus) and losers (loss of surplus) that result from the subsidy? Remember that there are always trade-offs, and therefore, someone must be the loser.