The supply and demand for wheat is given by Qs20002ap and Qd

The supply and demand for wheat is given by Qs=200+0.2a+p and Qd=500-p where p is the price of wheat and A is the amount of rainfall ( inches pe year), the effect of an incremental increase in rainfall on equilibrium will be? The answer is a decrease the price of wheat by 10 cents. But how do you go about solving this problem?

Solution

In equilibrium, Qd = Qs

500 - p = 200 + 0.2a + p

2p = 300 - 0.2a

p = 150 - 0.1a [Dividing both sides by 2]

The coefficient of \"a\" is -0.1, which means that if \"a\" (rainfall) increases by 1 unit, equilibrium price decreases by 0.1 units.