How does an economy gain/ lose by subsidizing all consumers of petro-products in current scenario?

Question

How does an economy gain/ lose by subsidizing all consumers of petro-products in current scenario?

Answer 1

The economy does not really gain by subsidizibnng consumption of anything whiose real costs are higher. Without subsidy, the prices would have been higher and would result in economy and reduction in the use of the scarece andf costly gasoline. It would have encouraged development new more fuel efficient, fiel saaving and alternative enegry technologies. Bu keepin subsides in place the Govt. and the society is indulging in extragavance, living beyond means, trying to risist desirable adjustments and changes in consumption pattern and development and intorduction of technologies that may help in the long run. The only gain from subsidies is political - trying to be popular by showing that govt. is so kind and considerate in gving such reliefs to the citizens. Subsidies for consumption acroos the line are pain killers that will have dangerous long-term effect.

Answer 2

Gain:

-Subsidies tend to reduce cost to the consumer.

-By reducing consumer cost, they encourage sales, which helps the seller.

-Reduced cost of petro-stuff means that companies who depend on P. in order to make their product can do so more cheaply and pass on the savings in their industry.

Loss:

-Subsidies cost government money which means increased debt and/or decreased spending in other areas and/or increased taxes.

-By making the petro-products cheaper than market value, you're encouraging consumption, which tends to be a bad thing, considering the politics of it and the environment and all.

-As a sub point on the last one, subsidies cause the product to be cheaper than the price the market determined is efficient.  You're going to end up using more PP than is worth the opportunity costs involved.

Answer 3

i dont know what petro-products are but i do study economics and when anything commodity is subsidized the benifit is mass production of that commodity benefiting the supplier of that good and the society that the good is  intended for will benefit because the prices would decrease which also means demand increases leading to a larger/faster market, the downside of subsidizing any commodity is the cost associated with maintaining the commodity at an affordable price, because if demand for that good was to increase immensely then the subsidizer will find it hard to subsidize goods which have increasing prices on them, and usually the money in which governemtn uses to subsidize for goods come from taxpayers dollars, so the governemtn has to be extremely careful to use this taxpayers dollars carefully or else the public would be angry and the economy of that speific market will fail