Given the demand function of a product isp 2x 26 and the

Given the demand function of a product isp = - 2x + 26 and the supily function isp = 4x - 9 Determine how price and quantity equilibriumhappens? What is the total amount of subsidies, if subsidies is 1?

Solution

Here we first put demand function and supply function equal to each other and then solve it for x as :

4x-9 = -2x+ 26

or 4x+2x= 26+9

or 6x= 35 or x= 35/6

So clearly equilibruim price is $35/6 = $5.83

This is the answer of part (a)

Now as subsidy is given on each product. And total product be 4x-9 = 4(35/6) -9 = 23.333-9 = 14.33

So total subsidy = 14.33 x $1 = $14.33

This is the answer of part (b)