Subsidy
In short
A subsidy is financial assistance provided by a government to individuals, households, or businesses to encourage certain economic activities or lower costs.
In plain words
The government gives money or tax breaks to help people or companies. This makes certain goods cheaper or helps a specific industry stay in business.
A simple example
A government might pay part of the cost for electric cars to make them cheaper for families to buy. This encourages more people to switch to green energy.
Why it matters
Subsidies can help protect essential services and support new technologies. However, they can also distort market prices and cost taxpayers a lot of money.
Easy to mix up
Do not confuse a subsidy with a tax, which is money people must pay to the government.