A market is characterized by the demand and supply curves: X_D= 40 - 4p and X_S= 2 + p, respectively. Which of the following is an appropriate designated support price under a price subsidy program? A)$ 9 B)$3 C)$7 D)$0

Question

Quizplus · Accepted Answer

To find the appropriate designated support price under a price subsidy program, we first need to find the equilibrium price where demand equals supply. Setting the demand and supply equations equal to each other: $40 - 4p = 2 + p$. Solving for $p$, we get $5p = 38$, so $p = 7.6$. A support price under a price subsidy program would need to be higher than the equilibrium price to be effective, making $9 the only option that is higher than the equilibrium price of $7.6.

A Market Is Characterized by the Demand and Supply Curves