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?
A)21 zlotys
B)14 zlotys
C)8 zlotys
D)20 zlotys
E)None of the above.

Question

Quizplus · Accepted Answer

At the price ceiling of 32 zlotys, the demand is q = 381 - 3(32) = 285 loaves, and the supply is q = 5 + 7(32) = 229 loaves. To make supply equal demand, the price must be adjusted so that 285 = 5 + 7(p + subsidy). Solving for the subsidy gives 8 zlotys.

In a Certain Kingdom, the Demand Function for Rye Bread