1. Suppose that the supply and demand of wheat depend on the price of wheat (p), the amount of annual rainfall (r), and the level of disposable consumer income (I). The equations describing the supply and demand curves are given by:
2. QS=20r +100p
3. QD=4000-100p +10I
4. (5 points) Using the supply and demand curve for wheat above, sketch the supply and demand curves demonstrating the effect of an increase in disposable consumer incomes. How does each curve shift (if at all) to the increase in income? What does the shift do to equilibrium price and quantity?
5. (5 points) Using the supply and demand equations for wheat, solve for the equilibrium price and quantity as functions ofIandr.
6. (5 points) Determine how the equilibrium price and quantity vary with an increase in rainfall(r) holding other factors that influence supply and demand fixed. How do the equilibrium price and quantity change with an increase in income(I).