Suppose that in the United States, the quantity of corn demanded Qd depends on two things: the price of corn P and the level of income in the nation I. Assume that the demand curve for corn is downward sloping. Suppose the quantity of corn offered for sale, Qs, also depends on two things: the price of corn, P, and the amount of rain that falls during the growing season, r. An increase in rainfall is good for corn production. However, excessive rain is not good. The supply curve is upward sloping. In equilibrium, the price of corn will adjust so that the market will clear (Qd = Qs). And suppose that the market is initially in equilibrium. Now think that the amount of rainfall is an exogenous variable, and the rain increases other exogenous factors remaining the same. What will happen to the endogenous variables P and Q due to this change in the exogenous variable?

• A.Equilibrium price will decrease.
• B.Equilibrium price will increase and equilibrium quantity will decrease.
• C.Equilibrium price will decrease and the equilibrium quantity will increase.
• D.Equilibrium price will decrease and the equilibrium quantity will decrease.
• E.Either B or C can happen.