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The demand function for rye bread was q = 181 - 8p and the supply function was q = 13 + 6p, 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 6 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?

Answer :

Answer:

56 zlotys

Step-by-step explanation:

The product here is rye bread.

Demand function is

[tex]q=181-8p[/tex]

Supply function is given by

[tex]q=13+6p[/tex]

Equilibrium is reached when demand =supply

i.e. [tex]181-8p=13+6p\\14p = 168\\p=12[/tex]

But there is a rule that price should not exceed 6 zloyts

So subsidy should be given in such a way that equilibrium price is 6

[tex]181-8p=13+6p+S[/tex] where S=subsidy and p = 6

Substitute to get

[tex]181-64 = 13+48+S\\S = 56[/tex]

Subsidy should be 56

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