DP Economics Questionbank

Discuss how the introduction of a subsidy in a market will affect consumers, producers and the government.

Define the term subsidies indicated in bold in the text (paragraph [2]).

Explain why governments provide subsidies.

Discuss the view that price floors are more effective than subsidies in providing assistance to producers in the agricultural sector.

Using a demand and supply diagram, explain the impact on households of “removing some subsidies on food” (paragraph [5]).

Discuss the consequences for different stakeholders in the economy of the government providing subsidies on goods, such as renewable energy.

Using a demand and supply diagram, explain the impact on the market for fuel of the government’s decision to reduce fuel subsidies (paragraph 2).

Using a demand and supply diagram, explain the effect on the price and quantity of fuel consumed in Angola, caused by the elimination of domestic fuel subsidies (paragraph 4).

Explain two reasons why a government might want to subsidize a good or service.

Using a demand and supply diagram, explain the effect of government subsidies on the US corn market (paragraph [5]).

Calculate the cost to the government of San Marcus of providing this subsidy to domestic cotton producers.

Draw and label the new supply curve following the granting of the subsidy to domestic cotton producers on Figure 3.

Discuss the view that the provision of subsidies by the government on goods such as agricultural products will always be beneficial to stakeholders.

Using a demand and supply diagram, explain how the cut in fuel subsidies may have had “severe consequences for low-income households” (paragraph [7]).