Suppose that King Kanuta, whom you met in your workbook, demands that each of his subjects give him 1 coconut 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)= 1,500 - 100p_d, where p_d is the price paid by consumers.In equilibrium, the price received by suppliers will be A)$6. B)$9. C)$7.50. D)$15. E)None of the above.

Question

Quizplus · Accepted Answer

In equilibrium, the quantity supplied equals the quantity demanded. Setting S(p_s) = D(p_d), we have 100p_s = 1,500 - 100p_d. Since the king demands an extra coconut for each consumed, the effective demand becomes 2(1,500 - 100p_d). Solving 100p_s = 2(1,500 - 100p_d) gives p_s = $6.

Suppose That King Kanuta, Whom You Met in Your Workbook