Subsidies destroy wealth by artificially inflating prices (misallocating resources). The perfect example of this has been the government subsidizing tuition for the last few decades (shift the demand curve for higher ed to the right, thus increasing demand and equilibrium price). Students now face tuition 5 to 6 times more expensive that is otherwise would have been. Students could have used that money being spent on overpriced tuition and interest towards something else. This also has created a situation of degree inflation. Read the following articles:

https://www.foxbusiness.com/economy/college-costs-soared-multiple-times-rate-inflation-50-years(Links to an external site.)

https://www.maciverinstitute.com/2022/08/the-real-reason-for-the-student-loan-crisis-government/(Links to an external site.)

https://www.cato.org/blog/top-five-reasons-federal-student-debt-cancellation-bad-idea(Links to an external site.)

1. Is there anyway out of this subsidy/inflation trap for students? How could this trend come to an end? Explain.

2. Could this example also apply to subsidizing electric cars? What could be the consequences?