Doli Kumari’s mother Geeta Devi became a beneficiary of the Ujjwala scheme in 2018, when she received a free gas cylinder and a stove to cook on for her family of five members. When they needed to refill the cylinder, her family paid the full cost – between Rs 620 and Rs 700 – to their LPG dealer, and received a direct cash subsidy of Rs 200 to Rs 250 in Devi’s bank account a few days later. Over time, as cooking gas prices rose beyond Rs 800 per cylinder, the subsidies stopped coming. “The gas agency told us they had sent the subsidy money, but it never came in the bank account, and the bank never solved the problem,” said Doli Kumari. Such problems have been widely reported across India ever since the government made so many promises with the people but failed to meet with them. Since Doli Kumari’s family could no longer afford gas refills, they switched back to burning wood for fuel. “That’s why we had started using the cylinder only during the monsoon, when it is difficult to get dry wood for cooking.
(i) Define factor income.
(ii) Write the role of subsidy in the economy.
(iii) What will be the effect of ending subsidies on GDP if the country?
pls answer fast
Answers
Explanation:
I) Ans:- Factor income flow of that is derived from the factor of production - the general input required to products good and services.
II) Ans:- Subsidy is a direct or indirect payment to individuals or firms, usually in the form of a case payment from the government, or a targeted tax cut. In economic theory, subsidies can be used to offset market failure and externalities in order to achieve greater economic efficiency.
III) Ans:- It was found that subsidy removed, without spending the associated saving, would increase the national poverty level. Therefore, if their goal is to reduce the inflationary affect the government will want to keep spending to a minimum focusing on that area can increase the country productive capacity.