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♪ [music] ♪ - [Prof. Alex Tabarrok] Today were going to start looking at subsidies. Were going to move quite quickly because if youve understood the material on taxes, the material on subsidies should follow pretty easily. However, if you havent understood the material on taxes, this is going to be even more mysterious. So make sure you understand taxes before we move on to subsidies. Here we go. Now a subsidy is really just a negative or a reverse tax. Instead of taking money, the government gives money to consumers or producers. Now here are some economic truths about subsidy. Who gets the subsidy does not depend on who receives the check from the government. Once again, the legal incidence of the subsidy -- who gets the check -- is not the same as the economic incidence. That should always already be familiar from our discussion of taxes. Similarly, who benefits from the subsidy does depend on the relative elasticities of demand and supply -- again, just as with taxes. Finally,
