The Total Surplus Lost can also be calculated by determining Consumer Surplus with no subsidy (CS,). Consumer Surplus with subsidy (CS,), and Government Losses. CS = 34 x (6 - 2] * (4 - 0) = $8 million (S. = M4 x (6 - 1) * (5 - 0) = $12.5 million With a government subsidy, the consumers will benefit by $12.5 - $8 = $4.5 million Government Loss = (2 -1) * (5 - 0) = $5 million Effects of Government subsidy: Consumer surplus goes up from $8 million to $12.5 million, but since the government loses $1 on every gallon of heating oil. the loss for government is $5 million. Therefore, the Net Loss for the Society (both, government and consumers) = (12 5 - 8) - 5 =-0.5 Total Economic Surplus lost = $0.5 million