Question)

Consider another countermeasure to this summer's price spike.

We decide to subsidize electricity production so that this summer's supply curve2 matches last year's supply curve1.

First, i) Point out which part of A~J in the figure below is the consumer surplus (CS), producer surplus (PS), and social surplus (SS), respectively, when no subsidy is applied.

(ii) In the case where subsidies are applied, which part of A~J in the figure below should be used for CS, PS, government surplus (G), and SS, respectively?

(iii) Compare the case with subsidy and the case without subsidy, and show how CS, PS, and SS change.

Also, explain how the dead weight loss (DWL) would change in this case.

Social Surplus (SS) = Consumer Surplus (CS) + Producer Surplus (PS) - Government Surplus (G)