A subsidy is the opposite of a tax. The government pays buyers a R0.50 subsidy for each bus ticket purchased.
a) What happens to the effective price paid by consumers buying bus tickets, the effective price received by bus companies and the quantity traded? Create a graph to justify your answer.
b) Who gains and who loses from this policy?

Question

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The Answer of A subsidy is the opposite of a tax. The government pays buyers a R0.50 subsidy for each bus ticket purchased.
a) What happens to the effective price paid by consumers buying bus tickets, the effective price received by bus companies and the quantity traded? Create a graph to justify your answer.
b) Who gains and who loses from this policy?

A Subsidy Is the Opposite of a Tax