Suppose that King Kanuta from demands that each of his subjects give him 4 coconuts for every coconut that they consume.The king puts all of the coconuts that he collects in a large pile and burns them.The supply of coconuts is given by S(p_s) = 100p_s, where p_s is the price received by suppliers.The demand for coconuts by the king's subjects is given by D(p_d) = 2,080 - 100p_d, where p_d is the price paid by consumers.In equilibrium, the price received by suppliers will be

A) $4.
B) $10.40.
C) $52.
D) $6.
E) None of the above.

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Taty’s Vlogs · Accepted Answer

Final Answer : A, Explanation :  In equilibrium, the quantity supplied equals the quantity demanded. The king's demand effectively increases the demand by a factor of 5 (1 for consumption + 4 for the king). So, the adjusted demand equation is 5D(p d ) = 5(2,080 - 100p d ) = 10,400 - 500p d . Setting this equal to the supply equation, 100p s  = 10,400 - 500p d . In equilibrium, p s  = p d , so 100p = 10,400 - 500p. Solving for p gives p = 4.

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