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in this video were looking at subsidies were looking at the basics of what a subsidy is and then how do we draw the diagram okay if we come over to the left side here and we have a look okay so what is a subsidy so weve got here subsidy is cash payments to domestic producers right so the cash payments go from the government to domestic producers this allows domestic producers to reduce their prices and increase how much they can sell so this is very much a form of protection one thing thats also important to note is that a subsidy is government spending it is an example of gee the government has to allocate money to pay for the subsidy if you think about different forms of protection tariffs for example this is a form of government revenue which is tea now its not primarily used to earn revenue but that is the impact of a tariff okay lets move over to the actual diagram of a subsidy so you can see weve got P and Q as per usual call that our supply curve and our demand curve oka