Advantages Of Administration Subsidies To Consumers Economics Essay


Subsidy, can be defined as benefits proposed by the federal government to groups, individuals, or industry in various forms such as welfare repayment, duty allowance, keep prices low, induce investment to reduce unemployment, and many more. It is also called 'subvention'. Purpose of subsidy is often used to get rid of some burden and considered to be interest of the general public. These subsidies should not be misused for just about any negative activities such as smuggling scheduled to not throwing away taxpayers' effort and hard work.

This report is going to focus on the advantages and down sides of government's subsidies to consumers and farmers. For consumers, in the law of demand, as the price decreases, volume demand will definitely increase. In order consumers, we don't really like to acquire goods and services with high price although it is the genuine selling price.

Advantages of government subsidies to consumers

Public Transport

So in order to lessen our burden, federal has recently helped us by subsidizing service such as general population travel. Subsidies can be encouraged because of communal function of general population transport. In which to stay the modern culture, it is actually needy of public transport for those vulnerable groups such as low income homeowners, individuals without driver permit, aged pedestrians, people with handicap, and many more. Public transfer subsidies is also a great choice for urban travel problem triggered by car such as noise and air pollution, difficulties to have parking slot machine game, traffic jam and congestion, and many more. So when there is more public vehicles subsidized, the more cars will be studied away from the traffic, the less pollution and car accident will be triggered. Besides that, we have to consider the freedom of travelers too. Travelers in every country should to take public transports to reach their destination credited to letting vehicles is too expensive. So upsurge in travel amount will lead to a source response in terms of higher frequencies and reduce scheduling cost of every traveler (Button, 1993).

In US, it shows that adding two new lanes on highways can only just provide short-term solution for congestion problem, but it generally does not have any positive influence on pollution and environmental problems. So for our indemnity, adding two record rail lines can in fact be considered a long-term solution for traffic congestion if citizens actually use it. A light-rail train can at least take away a dozen automobiles off the street while a commuter-rail teach can take off even more as these public transportation can actually remove air pollution by a major mass (BA, 2000).

Housing Subsidies

Besides that, federal has also introduced cover subsidies to us. Person or family's acquisitions of house can be indirectly subsidized by the government to allow cheaper homes to be built. In US, lower-income individuals are able to purchase cheap housing in an area called 'Section 8'. In the aim of minimizing poverty, US administration has successfully ensure that more young families have their shelter (Lichtenstein)

In China, there are numerous conditions of subsidizing property to numerous poor households. A 48 years old man along with his family has lived in a 50-square meter apartment without paying rent since June 2011 because of government subsidies. Low-income individuals can also get subsidized enclosure even in the best city, Beijing. For example, a man and his partner who are in their 70s, migrated into a public rental product in Beijing's Shijingshan area and allowed to pay 25% lower hire which rate will remain stable no matter any increase rate of lease of that area. For fresh graduates or young families, they can pay a low hire for federal government subsidized houses. These subsidized homes have saved about 26 million low income metropolitan families in the end of 12 months 2010. So to avoid cheating, job seekers should be cooperative with Guidance Departments to possess confirmation to approve subsidized houses. Once candidates are found cheating, they are not able to apply subsidized properties for another 5 years, while in Hong Kong, those cheaters will face an excellent or even a court charge (Zheng, 2012)

Disadvantages of administration subsidies to consumers

Reducing sugar subsidies

But there will be cons for subsidizing consumers too. For instance, glucose subsidization should be reduced as well. Since glucose is not a basic requirement but a hazardous substance to your health, removal of subsidy should be favorably enhancing our health and wellness. Furthermore, withdrawal of subsidy of sugars will not bring to acute increase of food and refreshments such as soft drinks, pastries, juices, pickled products, and many more. These subsidies benefit carbonated drinks manufacturers most such as Coca-Cola. Malaysians have been discovered that there was an increase of 4 teaspoons of sugar from 17 to 21 from 1970s to 1980s. Over consumptions of sugars will cause some lethal disease such as diabetes, heart and soul cancer, asthma, and many more. These subsidies should be actually used to help minimizing poverty programs and medical facilities rather than causing any health problem to anyone folks.

Reducing petrol subsidies

Besides that, federal government should also start reducing fuel subsidies too. A high subsidy on fuel will bring to less budget shelling out for other potential development domains such as infrastructure, way to obtain clean drinking water, education, and many more. The subsidies should actually be divided by the right percentage to every field instead of favoritism on gas subsidization only; usually, it'll cause 'Welfare Loss'. Additionally it is found that gasoline subsidies benefited the rich more than the poor. In India, although electricity and gasoline are being subsidized for low-income consumers, there continues to be more than 40% of subsidized electricity and petrol leaked to black market. This has caused failing of helping needy families to obtain cheap gas and triggered enrichment of politics cronies. Since Malaysia is the border between Singapore and Thailand, there seems to be some smuggling business of fuel and caused huge difference of petrol price between Malaysia and its own neighbor (Sam, 2012).

Advantages of federal government subsidies to farmers

Fertilizers & Pesticides subsidies

For the next focused group which is the farmers, administration in addition has subsidized farmers in an effective way. Agricultural subsidies are aim to support farmers' operation. These subsidies can be provided directly and indirectly. For good examples, cash payments, low-cost crop insurance, keep prices low, and so on.

In Sri Lanka, the federal government has the program to guarantee the paddy farmers to have a fixed price for fertilizers by paying importers to hide the difference between permanent price and brought in cost, for example this year 2010, 50kg bag of fertilizer was reported for just USD 3. 07(Tibbotuwawa, 2010). While in India, authorities started to subsidy to aid environmental revolution by spending to keep down the price of fertilizer, irrigation of normal water, and rural electricity. Besides that, the federal government also nationalized some banking companies in order to provide financial credits to farmers at preferential rate. For these two countries, there is short and medium term of effect on raising output and most importantly, the reduction of poverty (Smith & Urey, 2002).

Compensating farmers

In Japan, the Democratic Party of Japan (DPJ) administration was recommended to rectify problems by compensating the farmers' deficits. In 2010 2010, Japanese government made a decision to offer incentives to encourage farmers to expand their businesses to help improve efficiency and competitiveness in the agricultural sector. The bonuses, which is tacked to standard benefits under the income reimbursement program for individual farming homes, will be lengthened to farmers that increase the area under cultivation of rice and many other given products. Rice farmers can be also compensated if indeed they suffer bigger amount than expected reduction. Under the plan, all farmers that put their rice on the marketplace meet the criteria for a homogeneous 15, 000 in immediate income subsidy per 1, 000 square meters of land. (Hays, 2008).

Disadvantages of government subsidies to farmers

Driving small farmers out of business

While for the down sides of subsidizing farmers, it means that kinds of subsidization are being found in not a good way or it benefits non-target group. There are a few cases that have been about traveling small farmers out of business. Economist estimate that subsidies fill the worthiness of farmland by 30% and brought on prevention of young people farming due to starting the plantation will be exceedingly expensive while you may still find other bills including purchasing machines and securities, selecting employees. Large farms will most likely use their massive subsidies to acquisition other small family farms and made 3 quarters of rice farms converted into tenant farms. They often succeed scheduled to they could produce large quantity of food in low price, or we can call this as the 'economies of level' (Riedl, 2007).

Import Barriers & Environmental Damaging

In US, farm subsidies and agricultural import barriers caused a serious fence while improvement in global trade agreements has been made. For example, in US sugars safeguard, it only benefits a very small band of US growers but costs a blocking of broader free trade. Next, plantation programs also ruin environment. Farmers who are producing in region of better land and climate have the ability to use less fertilizers and pesticides but those who are in poor locations will tend to use more on the crops. Excessive use of chemicals may cause pollution at waterways and other water supply. Within the other way, vast water empire which was run by federal, sells drinking water to farmer at reduced price. Overuse of this water could lead to water crisis as the population of western of US continues to go up. Without subsidies, farming can in fact be stronger and more innovative industry anticipated to access of new internet marketers (Edwards, 2009)


So as conclusion, federal government has actually done many good assignments and launched many potential techniques to offer help on us, as consumers, and farmers, as agricultural employees. It do reduce burden and poverty in a great percentage. We have to really appreciate help from them and make the market becomes better and better. It really is unfortunate that there are still many unfair gatherings use these subsidies to generate their own profit and brought on needy individuals to suffer for another much longer period when they remain craving for help from other trusted authorities.

(Total 1606 words)

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