The combined welfare effects of the production subsidy and consumption tax are shown in the Table below. The letters refer to the area in the previous graph. Red letters indicate losses while black letters indicate gains. Consumers suffer a loss in surplus because the price they pay rises by the amount of the consumption tax. Notice that the consumer surplus change is read off of the original demand curve, not the effective demand curve.
Producers gain in terms of producer surplus.
The production subsidy raises the price producers receive by the amount of the subsidy, which in turn stimulates an increase in output. The government receives tax revenue from the consumption tax but must pay out money for the production subsidy. Thus, the net effect is a gain in revenue for the government. In the end, the cost to consumers exceeds the sum of the benefits accruing to producers and the government, thus, the net national welfare effect of the two policies is negative. Notice that these effects are identical to the effects of a tariff applied by a small importing country if the tariff is set at the same rate as the production subsidy or the consumption tax.