A market is characterized by the demand and supply curves: X_D= 40 - 4p and X_S= 2 + p, respectively. Under a buy- and- store program with a support price of $9, the government will end up buying: A)11 units. B)0 units. C)2 units. D)5 units.

Question

Quizplus · Accepted Answer

To find out how much the government will buy, we need to find the intersection of the supply and demand curves with the support price of $9. Demand curve: X_D= 40 - 4p 40 - 4p = 9 4p = 31 p = $7.75 Supply curve: X_S= 2 + p 2 + $7.75 = $9.75 Since the support price is higher than the equilibrium price ($9), the government will buy the difference between the quantity demanded and the quantity supplied at the support price: Quantity demanded: X_D= 40 - 4p 40 - 4($7.75) = 11 Quantity supplied: X_S= 2 + p 2 + $7.75 = $9.75 11 - 9.75 = 1.25 units Therefore, the government will buy 1.25 units. Since you cannot buy a fraction of a unit, the answer is 5 units (the closest whole number to 1.25).

A Market Is Characterized by the Demand and Supply Curves