Evaluating Subsidies (Online Lesson)

In this online lesson, students consider how to evaluate subsidiesand their effectiveness in tackling market failure.

WHAT YOU'LL STUDY IN THIS ONLINE LESSON

• A review of the reasons for using subsidies
• The link between price elasticity of demand and the impact of subsidies
• Key evaluation points in relation to real-world markets
• Consideration of subsidies in relation to "fairness" and costs

There is also a short data-response activity and an example essay to study.

Additional teacher guidance is available at the end of this lesson.

Thank you to Nicky King and Jon Clark for their contributions to this lesson.

HOW TO USE THIS ONLINE LESSON

Follow along in order of the activities shown below. Some are interactive game-based activities, designed to test your understanding and application of maximum prices. Others are based on short videos, including activities for you to think about and try at home.

If you would like to download a simple PDF worksheet to accompany the video activities, you can download it here: Evaluating Subsidies. You can print it off and annotate it for your own notes, or make your own notes on a separate piece of paper to add to your school/college file.

ACTIVITY 1: PICTURE QUIZ - SPOT THE MARKET FAILURE

You can see a picture of a seaside scene by clicking here to download a PDF. Your challenge is to spot as many examples of market failure as you can that could be tackled by using a subsidy, making sure that you can state what type of market failure each example is.

ACTIVITY 2: VIDEO - REVIEW OF HOW SUBSIDIES WORK

This video provides a quick review of the Online Lesson on Introduction to Subsidies. It's worth making sure you are happy with the content of this video before progressing with the remainder of this online lesson.

ACTIVITY 3: GAME - ELASTICITY REVIEW

Before watching the next video, you might find it helpful to review the topic of Price Elasticity of Demand. You can test your knowledge of PED, and remind yourself of some key quantitative skills, by having a go at the following quiz.

ACTIVITY 4: VIDEO - SUBSIDIES AND PED

The impact of subsidies differs depending on the degree of price elasticity of demand. This video guides you through the technicalities of this topic.

ACTIVITY 5: VIDEO AND DATA RESPONSE

This short video introduces some ideas about how to evaluate the impact of subsidies in context; it is important in exams to link theory and evidence together in order to be awarded the highest possible marks. You can then apply your knowledge and have a go at a short data-response exercise.

You can download an Edexcel-style data response on wind turbines here.

Or you can download an AQA-style data response on wind turbines here.

If you follow a different awarding body, ask your teacher which of the above files is the most appropriate one for you.

ACTIVITY 6: GAME - SUBSIDY DIAGRAMS

Check your understanding of subsidy diagram by having a go at this short interactive game!

ACTIVITY 7: VIDEO AND ESSAY ANALYSIS

In this video, you'll find out more about some of the debates over cost and fairness / equity in relation to subsidies. You'll then have the opportunity to take a look through an example essay on the effectiveness of subsidising electric cars.

You can download a PDF of the example essay here.

ACTIVITY 8: TEST YOURSELF!

All students, regardless of awarding body, will have to answer multiple-choice questions in their A level economics exam. Here is a short MCQ quiz that you can have a go at. You might want to give your score to your teacher.

ACTIVITY 9: ENRICHMENT TASK

Take a look at this article from Forbes on "The Myth of Subsidies". Write 2 reasons why you agree with its argument, and 2 reasons why you do not.

ACTIVITY 10: EXTENSION TASK - SUBSIDIES AND COMPETITION

To what extent do subsidies affect competition?

In order to help you write a plan for the above (tricky!) essay question, you could take a look at the following sources of information:

• An OECD analysis of subsidies and competition
• The UK Government official guidance on assessing the impact of subsidies (it is from 2007, but remains the latest guidance)
• This analysis from the World Trade Organization
• A challenging academic journal article on how subsidies can be used for "leapfrogging" (don't forget to click on "download this PDF" on this webpage)

ADDITIONAL TEACHER GUIDANCE

This lesson comprises:

• Around 30 minutes of guided video activity, spread over 4 videos
• Around 15 minutes of "thinking time", spread across the 4 videos
• A short data-response type activity (Activity 5) - do ensure that your students select the most appropriate DR activity for their awarding body
• An opportunity to analyse an example essay on subsidies for electric cars, building important essay writing skills (Activity 7)
• A multiple-choice quiz
• Several game-based interactive activities, reviewing knowledge of PED and subsidy diagrams
• 2 enrichment / extension tasks

You can download brief suggested answers to some of the lessons tasks here. We suggest that the "core" of the lesson takes around 45 minutes, along with an additional 30 minutes for the data response activity and 15 minutes for the task requiring students to analyse the example essay. The games/quiz activities are likely to take around 10-15 minutes, and the enrichment/extension tasks as long as students would like!