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A buyer's subsidy can also change what sellers receive

In a simple competitive-market model, a subsidy changes the gap between the buyer’s out-of-pocket price and the seller’s revenue. The interesting question is how the benefit is divided, and what assumptions would have to hold before the model described a real policy.

3–7 min

Questions you could explore

  • How might the result change if supply cannot expand easily?
  • Which costs or social benefits does the simplified model leave out?

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Economics and money

Why can the official inflation rate differ from your shopping bill?

A national price index combines thousands of goods and services that no single household buys in the exact same proportions. Because the Consumer Price Index uses average spending weights, a jump in rent or groceries can hit your personal budget much harder than the headline inflation figure suggests.

4–5 min

Why can the official inflation rate differ from your shopping bill?

Economics and money4–5 minA national price index combines thousands of goods and services that no single household buys in the exact same proportions. Because the Consumer Price Index uses average spending weights, a jump in rent or groceries can hit your personal budget much harder than the headline inflation figure suggests.

Economics and money

What does a free afternoon still cost you?

An hour can be free of charges and still be scarce. Choosing one use means giving up the best available alternative, which is the opportunity cost even when no money changes hands.

3–5 min

What does a free afternoon still cost you?

Economics and money3–5 minAn hour can be free of charges and still be scarce. Choosing one use means giving up the best available alternative, which is the opportunity cost even when no money changes hands.

Economics and money

How can insurance spread financial risk across a group?

An uncertain large loss for one person can become part of a wider pool of risks. Insurance connects that pooling with a contract and a premium, while the contract still determines which losses are covered.

3–7 min

How can insurance spread financial risk across a group?

Economics and money3–7 minAn uncertain large loss for one person can become part of a wider pool of risks. Insurance connects that pooling with a contract and a premium, while the contract still determines which losses are covered.

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