Part III. Financial Applications 5 The demand and supply functions for a certain product are given by p = 0.29², and p = 13-q, where p is in some monetary unit, and q is a count of items in some multiples (e.g. thousands, or millions, or...). 1. Which is the demand function? 2. Find the equilibrium price and quantity 3. Find the consumer and producer surplus and the total gains from trade at p = 8 and at the equilibrium price. 4. (optional) Explain why total gains from trade will always be highest at the equilibrium price (the easy way is to use a picture)

Fig: 1