Note: This is post #13 in a weekly video series on basic microeconomics.
What is a subsidy? A subsidy is really just a negative or reverse tax, explains Alex Tabarrok. Instead of collecting money in the form of a tax, the government gives money to consumer or producers. In this video by Marginal Revolution University, Tabarrok looks at the subsidy wedge and who benefits the most from different subsidies.
(If you find the pace of the videos too slow, I’d recommend watching them at 1.5 to 2 times the speed. You can adjust the speed at which the video plays by clicking on “Settings” (the gear symbol) and changing “Speed” from normal to 1.25, 1.5 or 2.)
Previous in series: Understanding tax revenue and deadweight loss