what is subsidy in economics

A subsidy is a benefit given to an individual, business, or institution, usually by the government, in the form of direct or indirect payment, tax breaks, or grants. The subsidy is typically given to remove some type of burden, and it is often considered to be in the overall interest of the public, given to promote a social good or an economic policy. Subsidies can be used to offset market failures and externalities to achieve greater economic efficiency. They can assist struggling industries, encourage new developments, and promote a social good or policy. However, critics of subsidies point to problems with calculating optimal subsidies, overcoming unseen costs, and preventing political incentives from making subsidies more burdensome than they are beneficial.