- A decrease in price solves under-consumption.
- Acts as an initiative to businesses to produce more.
- Reduces the cost of production.
- Allows resources to be used for other purposes.
- Promotes expansion.
- Increases a business's competitive edge as they can charge lower prices.
- Increases social benefit when applied to merit goods such as education.
- It is difficult to measure the gains in social benefits, if there are any at all.
- They are ineffective for inelastic goods.
- Can't be funded forever; entirely dependent on the government.
- Can limit motivation as it reduces a business's dependence.
- Will most probably come from a raise in taxes.
- Businesses may become reliant on subsidies as a method of funding.
- It is difficult to decide who receives a subsidy.
- It can produce a consumer surplus.
- It encourages new businesses into the industry even if the demand does not require them.