Price subsidy programs costs

Quotas can limit the total cost of the subsidy program. A sudden rise in the local or international price of the subsidized good can result in an unplanned increase in the subsidy budget. This financial risk is reduced if the quantity of the good that is subsidized is fixed. 

Under the program the government 1) negotiates a price for a medicine with the supplier of the product 2) controls the mark-ups applied at all stages of the supply chain and 3) subsidizes the cost of the medicine to patients where the price exceeds certain limits. The subsidies are linked to the welfare needs of the patient and a safety net provides protection for high users of medication. 

Another objective of the program is to increase manufacturing volumes to decrease costs. Japan s target cost for residential fuel ceU systems is 0.5-0.7 million yen ( 4100-5900) - current costs of the system are around 2-2.5 million yen ( 16 700-21 000) [58-60]. Despite the fact that current prices offer customers a payback period of over 10 years, even including the subsidy, the units are selling fairly well - as of January 2011, over 5200 units had been installed. The project partners credit this success to the environmentally beneficial attributes of the systems [60]. In the future, manufacturers plan to expand their market by reducing... 

The costs of distributing food rations can also be high and are determined mainly by the difference between what the government pays for a unit of a commodity included in a distribution program and the price consumers pay. The full cost is often much higher if the costs of production subsidies, storage, and transportation are also taken into account. 

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