Grade 9B_IGCSE
" Discuss the advantages and disadvantages
of a government intervening in a market
through the use of subsidies.."
Time Duration for submitting the Article is
Aug 19th to August 25th, 2013
Write your answer here in 500 Words.
"Marks allocation will be in accordance to the Rubrics"
For rubrics please check in
'Food for thought column on my bog under title Rubrics'
Advantages:
ReplyDelete-Small businesses can Expand
If government give subsidies to small businesses, these small businesses may have more money to expand their business and therefore it can help increase Indonesia's economic growth.
-Citizens can be more prosperous
By giving subsidies to citizens for their daily needs, citizens will be able to pay less money and save more money for them and their family.
-Helps small businesses to Reduce cost of production
By giving subsidies, small businesses may have more money to order supplies in larger amount and get cheaper prices and therefore it can reduce the cost of production.
Disadvantages:
-Government may lose huge amount of money
By giving subsidies to daily goods/services, local citizens will buy more and more everyday and government's expense will increase and increase even more. Example: Petrol BBM Pertamina. In the Pertamina case, government lose money and experience loss due to the massive demand of citizens.
-Subsidies are not correctly applied
This usually happens when the rich ones are the ones using the subsidies, not only the poor ones.
-Subsidies can cause citizens to be dependant to it
Some citizens might not work their hardest because they think that the money they are earning is enough for daily life because the government give subsidies. Because of this "comfortablr" feeling, they are not very motivated to earn more. Which means that they depend on the subsidies given to supply their life.
So, those are the advantages and disadvantages of subsidy.
Summary: Subsidies might help small businesses and poor citizens, but it can also create loss of the government and make citizens depend on it.
Well done Joanna,
ReplyDeleteConclusion should be more compelling and strong.
Subsidies have many advantages and disadvantages. Firstly, the advantages are that the cost of production becomes lower for firms since they are being subsidised. Because of this, prices of the product subsidised becomes cheaper, making it affordable for everyone. This becomes very benefitial for the lower-income group who couldn’t have bought the goods without the subsidies given. Because of this, demand of the product will become higher, leading to the expansion of the local economy and making these companies more competitive. For example, Company W produces sugar and supposedly sells it at a cost of Rp 8 000/kg, but because sugar is subsidised, the cost of sugar becomes Rp 4 000/kg, which is half the price of its original value. Because of this, more people will be able to buy sugar, and so the demand of sugar will increase, expanding the business of Company W.
ReplyDeleteThe disadvantages of subsidies are that firms will tend to rely on the government’s subsidies for the demand of a product and the cost of production. For instance, Company X, which is the leading source of cooking oil in Country Y stops getting subsidies from the government, the demand will fall, forcing Company X to shrink or do not grow in size, because the company relies too much on the subsidies given. Also, subsidies may become inefficient if these subsidies are given to the wrong industry, and if more subsidies are given, more public expenditure is needed, increasing the amount of taxes given to the people living in the country.
In conclusion, subsidies have both advantages and disadvantages, and even though subsidies are implied to make things more affordable for citizens of the country, there are risks of subsidising products such as subsidising the wrong product, making producers of subsidised goods inefficient and creating a higher amount of tax to be paid for the country.
Government intervening thought subsidies in market has advantages and disadvantages to the company, consumer, or the government it self.
ReplyDeleteWhen government gives subsidies to the company so the company can sell their goods or service with a lower price. The lower price the higher the demand will be and he will get more profit because the company get subsidies that will lower the operation cost for example company A usually sell the goods to consumer Rp100.000, 00 every month 10 people bought it the operation cost to make one product Rp50.000, 00 and the company want to get profit Rp50.000, 00 so the price is Rp100.000, 00 so the company get profit Rp500.000, 00 but when the government give subsidies to the company Rp20.000, 00 to each product the company operating cost will decrease so the market price will be decrease become Rp80.000, 00 and every month the 100 people bought it so 100 X Rp50.000, 00=Rp5.000.000, 00. The company gets profit more and the consumer get advantage also because they can buy the same goods with a lower price. Subsidies can also can help the small company to buy capital and row material so the can stay strong. And subsides can also be use to do Research and development that will need a money to do that.
Giving subsidies to company will cost a lot of money that will need to be spend by the government and some subsides is not given to the right people that actually needs it the purpose of giving subsidies is lower the price so the poor people can buy those goods and survive. For example giving subsidies to PERTAMINA so it can lower the cost of the petrol that will effect other goods price but the petrol that have be subsides is used by the rich people so the government spent a lot of money to the rich people. Subsides can make a firm becoming depend if there is no subsides to company will fall down this usually happen to unstable small firm.
So government needs to choose which company that need subsides and which one doesn’t need subsides because the purpose of giving subsides to help the poor people not make the rich people become richer and the poor people can’t do anything
Government can intervening the market by the uses of subsidies,this things can be done by giving subsidies to the small firm so they can expand ,and lower the cost of their production.When the small firm get a subsidies they will produce cheaper goods for ex company A produce rice for Rp 50.000 before the subsidies,when the government give Rp 20.000 subisidies/kg it will increase the prosperity of the poor citizens in the Indonesian countries.Because of this the demand of this products will rise ,usually the government give the subsidies to the local firm so it will help the economic growth of Indonesia .It will help the local firm to expand and compete with another firms.But sometimes subsidies may have a several disadvantages,The firm tend become dependent on the subsidies that is given by the government ,So when government stop subsidizing them the growth of the company will shrink ,and of course the cost of the production will also rise because the government allready stop giving the subsidies to the firms,and the demand will also fall when the cost of production rise the consumer will find a new alternatives products that have a lower cost. So the conclusion is the government need to give a subsidies to the right firms that is needed by the consumer for ex :rice,sugar,and daily needs.IF the government give a subsidies to the wrong companies it means it will increase the public expenditure ,and forcing the citizens to pay more taxes the government .Actually all of the subsidies is coming from the taxes that is paid by the citizens.So the government need to choose carefully the companies/firms that is right to get a subsidies so it will be benenficial for the consumer,producers,and the government.But sometimes in Indonesia the rich people tend to enjoy more of the public expenditure,and subsidies from the government ,because they have a lot of cars ,and automatically they will buy more petrol compared to the low income people so the rich people become richer and the poor people become poorer . So the government need to choose the right companies that will received a subsidies from the government that will benenficial for the poor people.
ReplyDeleteGood article George,
Deleteplease mention the sources when you give any data in support of answer. Try to write in separate paragraphs.
Well done.
Advantages of subsidies:
ReplyDelete-Reduce cost of production
Subsidies can reduce cost of production so the price of the product will decrease. It usually applies on merit goods that most people need, ex: fuel and rice. This make the market more cometitive because there are cheaper product, but some people still corrupt the money used in subsidies. For ex: price of normal rice is Rp.6000/kg but the government subsidies it and it becone Rp.4000/kg. it also an advantaged to the factory because they have more demand
-New or small business can expand
Small business can expand by subsidies from government because they can lower their cost of production which makes their demand increase, it also can improve economic growth because the country don’t need to import stuff from overseas so it can make the currency more stronger.
-Increase the firms competitive edge in terms of price
The firms competitive edge will increase because the price is cheaper than the other firms price, so the other company will push their profit so they don’t lose their demand making consumer spending increase, its good for the economy of a country.
Disadvantages of subsidies:
-increase taxes
Government have to increase taxes in order to fulfill the subsidies, so direct taxes will increase which cause less onsumer spending and its not good for the economy.
-encourage inefficiency by relying more on subsidy money
People sometimes rely on subsidies and when the price is increasing they will do a demo.
-corrupt the money
Sone politic figures corrupt the subsidies money that must be used for a subsidies.
-its difficult to decide who receive subsidies in reality
Its hard because rich people sometimes still use subsidies even they actually can buy a non subsidy product, making government lost a lot of money
The advantages are :
ReplyDelete- Growth of the economy
Businesses gets more supplies and can increase the production and produce more output and be more effective, Governments give subsidies to other businesses which can get them more machinery and raw materials in cheaper price and more demands of the product, which makes the business expand, and since the business expand the economy will also grow.
- Growth of business
since the product of the business is better, and cheaper, so more people will want to buy the product and the business will also expand and more income and profit will be created by the business
-More goods and subsidies provided by the government
since the business are getting more income, the governments will also get more taxes, which will also help provide the public and merit goods for the country and gives more subsidie which may help lower the poverty
The disadvantages are:
-increase in tax
since the economy is getting bigger and the business are expanding, the government will increase it's tax to get more money for the country to live and to give more and more susidies to provent inflation from printing, borrowing, etc money
-government failure
since the government did not give much information of the how much they're giving the subsidies, people may not agree and may start a riot and will turn againts it and it may cost inefficiency because it's getting difficult who is getting the subsidies, and sometimes it ends being the rich be richer and por be poorer
-competition
since the country is growing, some businesses from abroad will not want the product from the country to be exported or imported because of the competition between them.
-celine B