Question

In a certain kingdom, the demand function for rye bread was q = 381 − 3p and the supply function was q = 5 + 7p, where p is the price in zlotys and q is loaves of bread. The king made it illegal to sell rye bread for a price above 32 zlotys per loaf. To avoid shortages, he agreed to pay bakers enough of a subsidy for each loaf of bread so as to make supply equal demand. How much would the subsidy per loaf have to be?

Answer 1

Answer:

  8 zlotys

Step-by-step explanation:

At Z32 per loaf, the demand will be ...

  q = 381 -3(32) = 285 . . . . loaves

In order to produce 285 loaves, bakers must enjoy a price of ...

  285 = 5 +7p

  280/7 = p = 40 . . . . . zlotys per loaf

Since the loaves are sold for Z32, and bakers are expecting to be paid Z40, the subsidy they receive must be ...

  Z40 -Z32 = Z8

The subsidy per loaf would have to be 8 zlotys.