Demand-side Subsidies are aimed at stimulating consumption of final goods on the consumer side of the market.
1. In-Kind Subsidies and Vouchers. In-Kind subsidies are provided to individuals who meet certain need criteria and are used to provide for a range of goods through the use of vouchers. The range of products can range from food stamps to school choice.
a. Some of the drawbacks of this approach is the formation of a black market for vouchers in exchange for cash that may be used for other goods.
2. Tax Expenditures. In this context, this approach is used to stimulate demand for goods or the funding of non-profit agencies. An example of this would be Social Security payouts.
a. A criticism of this approach would be an inequitable distribution of the subsidy to those who hitch a free-ride without contributing to the subsidy.