Remember King Kanuta and his tropical island? The demand function for coconuts by his subjects on the island is D(p)?1,200?100p and the supply function is S(p)?100p. The law used to be that any subject who consumed a coconut had to pay another coconut to the king. King Kanuta then ate all the coconuts he got. But now the king, apparently fed up with coconuts, decides to sell the coconuts that he collects in the local market at the going selling price, ps. In equilibrium, what is the number of coconuts that will now be produced?

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Finding the Number of Coconuts Produced The problem presents a unique scenario where the kings consu... View the full answer