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A-Level Economics · Subsidy diagram question

Which area is TOTAL GOVERNMENT SPENDING on the subsidy?

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The diagram

The answer

The area C E F A. £4 per unit × 7 units — rectangle CEFA between the two prices. Note it's BIGGER than the surplus it creates: triangle GFE is lost. Spending = subsidy per unit (£7−£3) × the NEW quantity (7): rectangle CEFA. Part becomes CS, part PS — and triangle GFE, pointing at the old equilibrium, is pure loss.

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This is one of 5 questions on the subsidy diagram — every corner lettered, every wrong answer diagnosed.

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