As with taxes the total subsidy per unit is the vertical distance between the
supply curves, but since it has the effect of lowering costs of production the
subsidy will shift supply to the right to S + subsidy. This has the effect of
increasing output to Q2 and lowering the price to Pc. The cost taxpayers (paid
by the government) is equal to the total subsidy per unit (ab) multiplied by the
quantity of the good consumed (Q2) this gives the shaded area PcPfab.
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