Always gotta be careful applying 101 knowledge to a real world problem.
Also, this is an unfortunate misinterpretation of even econ 101. Econ 101 says that there is not a fixed demand for most goods. Demand (and supply) have elasticity, which is a measure of their responsiveness to price changes. A rational producer with perfect information does not "clear the market" if that means "supply enough to meet all demand for the good." (If that's not what it means, I really don't know what it does mean.) They supply just to the point where marginal cost of production is equal to the price the next consumer is willing to pay.
And, subsidies are not definitionally distortionary. Sometimes they can be used to correct uncaptured positive externalities.
Also, this is an unfortunate misinterpretation of even econ 101. Econ 101 says that there is not a fixed demand for most goods. Demand (and supply) have elasticity, which is a measure of their responsiveness to price changes. A rational producer with perfect information does not "clear the market" if that means "supply enough to meet all demand for the good." (If that's not what it means, I really don't know what it does mean.) They supply just to the point where marginal cost of production is equal to the price the next consumer is willing to pay.
And, subsidies are not definitionally distortionary. Sometimes they can be used to correct uncaptured positive externalities.