1. Markets for corn and wheat are competitive. The price elasticity of supply for corn is (+2). The price elasticity of demand for corn is (0.4). The cross-price elasticity of demand for corn with respect to price of wheat is (+0.4). Suppose that due to adverse weather conditions in Ukraine, the price of wheat is expected to rise initially by 3%.

What will happen with quantity of corn traded and the price of corn if we assume that the price of wheat rises by 3% and stays there? Provide a good graphical illustration and algebraic derivation of your estimates