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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.
The basic characteristic of all subsidies is to reduce the market price of an item below its cost of production. Also called subvention. 2.Indirect financial contribution by a firm to its employees, such as low cost meals or free transportation.Also called benefit.or decades, the federal government has provided a subsidy to corn producers in order to lower the price of corn and products containing corn for consumers.