Question: Suppose that the demand function for corn is Qd = 1.1 - 0.25P + 0.1I where P = the price of corn and I =

Suppose that the demand function for corn is Qd = 1.1 - 0.25P + 0.1I where P = the price of corn and I = per capita income.

The supply function for corn is Qs = 4.3 + 0.5P - 0.04P_Oil, P_Oil is the price of oil. At the moment, I = 20 and P_Oil = 50.

a) Calculate the equilibrium price (Q) and quantity (Q). Round to 2 decimal places for P and Q

b) Calculate the consumer surplus and producer surplus.

c) Assume that the price of oil increases (holding other factors constant)? What will happen to the equilibrium price and quantity? Explain your answer.

d) Assume that the price of oil and income both increase at the same time (holding other factors constant)? What will happen to the equilibrium price and quantity? Explain your answer.

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