Suppose that King Kanuta demands that each of his subjects give him 2 coconuts 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) = 2,666.67 - 100p_d, where p_d is the price paid by consumers.In equilibrium, the price received by suppliers will be

A) $8.
B) $12.
C) $13.33.
D) $40.
E) None of the above.

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allison Shirley · Accepted Answer

Final Answer : A, Explanation :  In equilibrium, the quantity supplied equals the quantity demanded. Setting S(p_s) = D(p_d), we have 100p_s = 2,666.67 - 100p_d. Since the king demands 2 coconuts for every 1 consumed, the effective demand is D(p_d) = 3(2,666.67 - 100p_d)/3 = 2,666.67 - 100p_d. Solving 100p_s = 2,666.67 - 100p_s gives p_s = $8.

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