# Subsidies Incidence on Producers and Consumers

When calculating the incidence on producers and consumers using a demand and supply curve is dead weight loss a part of the incidence? I know that for example the producer's incidence is a rectangle with a height of the old supply curve price at the new equilibrium quantity minus the new equilibrium price. What I'm not sure about is the width of the rectangle. I know it should start at the y-axis, but I'm unsure of where to stop. The original equilibrium quantity? Or the new equilibrium quantity? If I were to extend the rectangle to the new equilibrium quantity then dead weight loss is included. Is this correct?

• What do you mean by incidence? Oct 25, 2015 at 19:06
• In this answer: economics.stackexchange.com/a/5037/1601 you can see both the consumers' and the producers' surplus in competitive equilibrium. If you calculate the deadweight loss of a situation, you calculate the surpluses in that situation as well. The total change in surplus is the deadweight loss. If the change is caused by a tax, subsidy, etc. don't forget to include the change of the governments surplus (total tax/total subsidy). Oct 25, 2015 at 19:09
• I'm referring to how much subsidy incidence is enjoyed by the buyers. Oct 25, 2015 at 19:11