The graph below shows the market for wine in the ancient Roman province of Potium. Equilibrium is at E at the cross of demand (AB) and supply (GH). To win the gratitude of the mob governor Fidelius subsidises the sales of wine. As a result, the quantity produced and sold increases from Q_Eto Q_S. Consumers pay the price P_Cper unit while producers receive P_Sper unit sold.

a.Identify the cost of the subsidy for the treasury.

b. Explain and indicate the areas that are the increases in consumer and producer surplus to make it clearer.

c.By using the concepts of producer and consumer surplus examine whether the subsidy increases or decreases social welfare