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A subsidy is a direct or indirect payment to individuals or firms, usually in the form of a cash payment from the government or a targeted tax cut. In economic theory, subsidies can be used to offset market failures and externalities to achieve greater economic efficiency.

The subsidy may be a specific amount of money per unit of quantity of a good or service, or it may be calculated ad valorem as a specified percentage of the price per unit. A subsidy may also be calculated as the difference between a specified target price and the market price actually paid by a buyer.

A subsidy is often given to remove some type of burden, and it is often considered to be in the overall interest of the public. In economic terms, a subsidy drives a wedge, decreasing the price consumers pay and increasing the price producers receive, with the government incurring an expense.

A price for a product that is reduced because the government has paid part of the cost of producing it: Officials told farmers what to grow, bought their crops, and sold them at subsidized prices. (Definition of subsidized price from the Cambridge Business English Dictionary © Cambridge University Press)

Payments to both commercial firms and low-income individuals are examples of direct subsidies. This could include housing allowances, food vouchers for low-income families, or payments to private businesses as ?cash in the bank? payments.

A. : to purchase the assistance of by payment of a subsidy. b. : to aid or promote (someone or something, such as a private enterprise) with public money. subsidize soybean farmers.

To pay part of the cost of something: £50 would help to subsidize the training of an unemployed teenager. The refugees live in subsidized housing provided by the authorities. All private universities are subsidized by the government.