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Yes. By definition price can't be the intersection of supply and demand if there are subsidies. Also Econ 101 isn't "fundamental reality", it's a useful model.
by iudqnolq 4y ago
Yes. By definition price can't be the intersection of supply and demand if there are subsidies. Also Econ 101 isn't "fundamental reality", it's a useful model.
- perryizgr8 4y ago> By definition price can't be the intersection of supply and demand if there are subsidies That's what the government would like to believe. But with incentives perverse enough, the reality of the market starts sneaking into the system in unpredictable ways. For example, if train tickets are extremely subsidized and flight travel is banned, people will start re-selling tickets at a higher price in the black market. > it's a useful model. Yes, it is very useful. And dangerous to think it doesn't apply just because a bureaucrat sitting somewhere in the government apparatus thought it would be a good idea to subsidize trains and ban flights.