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Economic Definition of subsidy. Offline Version: PDF. Term subsidy Definition: A payment from government to individuals or businesses without any expectations of production. The best way of thinking about a subsidy is as a negative tax.
[1] Consumer/Consumption subsidies commonly reduce the price of goods and services to the consumer. For example, in the US at one time it was cheaper to buy gasoline than bottled water. Whether subsidies are positive or negative is typically a normative judgment.ith an employment subsidy, the government provides assistance with wages. Another form of employment subsidy is the social security benefits. Employment subsidies allow a person receiving the benefit to enjoy some minimum standard of living.