Question

The demand for eggs is given by Qd=30-5P and the where Qd is the quantity of eggs demanded in ‘000 kgs and P is the price of an egg. The supply is given byQs=6+P where Qs is the quantity of egg supplied in ‘000 kgs. If a subsidy of Rs.3 per egg is provided to the producer, what will be the new equilibrium price and quantity of eggs in the market?... 3 Marks

A. P=Rs.4; Q=10,000 Kgs

B. P=Rs.1; Q=25,000 Kgs

C. P=Rs.3.5; Q=12,500 Kgs

D. P=Rs.3.5; Q= 9,500 Kgs

Answer 1

To find the new equilibrium price and quantity of eggs in the market after a subsidy is provided to the producer, we need to equate the new demand and supply equations and solve for the price and quantity. The new equilibrium price is Rs.0.96 per egg and the new equilibrium quantity is 10,000 kgs.

Step-by-step explanation:

To find the new equilibrium price and quantity of eggs in the market after a subsidy is provided to the producer, we need to equate the new demand and supply equations. The demand equation after the subsidy is Qd = 30 - 5(P - 3), and the supply equation remains the same as Qs = 6 + P. Solving these equations simultaneously will give us the new equilibrium price and quantity:

Qd = Qs

30 - 5(P - 3) = 6 + P

Simplifying the equation,

25P = 24

P = $0.96 per egg

Substituting this value back into either the demand or supply equation will give us the new equilibrium quantity, which is approximately 10,000 kgs.

Therefore, the correct answer is P = Rs.0.96; Q = 10,000 Kgs.