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2. Suppose that the quantity of corn supplied depends on the price of corn, p; and the amount of rainfall, R: The demand for corn depends on the price of corn, p; and the level of income, Y: The equations that describe the supply and demand relationships are

Qs = 20R+100p Qd = 4000␣100p+10Y

(a) Sketch a graph of supply and demand curves that shows the e§ect of an increase in rainfall on the equilibrium price and quantity of corn. Please label your axes, and all curves, indicating the direction of shift of one or both curves as appropriate.

(b) Sketch a graph of supply and demand curves that shows the e§ect of an increase in income on the equilibrium price and quantity of corn. Please label your axes, and all curves, indicating the direction of shift of one or both curves as appropriate.

(c) Solve for equilibrium price and quantity as functions of R and Y:

(d) Comparative statics: how does the equilibrium price of corn change as R changes? How does the equilibrium price of corn change as Y changes? Interpret these results.

(e) Comparative statics: how does equilibrium quantity change as R changes? How does equilibrium quantity change as Y changes? In- terpret these results.