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: Qs = 20r + 100P and Qd = 4000 100P + 10I.
1. Solve for the equilibrium price and quantity as functions of I and r.
2. Determine how the equilibrium price and quantity vary with an increase in rainfall(r) holding other factors that infuence supply and demand xed. How do the equilibrium price and quantity change with an increase in income(I). Answer this comparative statics question using calculus. (hint: use derivatives to address the signs.)