Definition check: What do “subsidies” mean in public finance? Full question: Choose the most accurate description of subsidies as used by governments in markets. Choose the correct option.

Given data

• Term: Subsidies.
• Context: Government intervention in markets.

Concept / Definition
A subsidy is a budgetary transfer from the government to producers and/or consumers intended to lower the effective price paid, raise the price received, and/or encourage production or consumption of the targeted good/service.

Examples
Fertilizer subsidy to farmers; food subsidy to consumers via PDS; interest subvention on priority-sector loans.

Final Answer
Government transfers to producers or consumers to reduce prices or support output.