Subsidy
Government payment supporting producers/consumers.
Formula
Effective price to producer = Market price + Subsidy per unit
Real World
The UK government subsidised electric vehicle purchases through the Plug-in Car Grant (up to £3,000 per vehicle), lowering consumer prices and boosting EV sales for manufacturers like Tesla and Nissan.
Exam Focus
Always state who receives the subsidy (producer or consumer) and the direction of the effect on price and quantity — marks depend on precision.
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