Question

3) Suppose the household earns 40% of their income by selling a cash crop, spends nothing on inputs, and consumes none of the cash crop. Rest of the 60% of their income received by selling their family labor. If the price of the cash crop rises by 20 percent and wage rate increases by 15%, calculate: a. Net rice sales as fraction of total consumption expenditure

Answer 1

8 / 69

Step-by-step explanation:

Fraction = Net rice sales / Total consumption expenditure

Fraction = 8 / 69

Working

Total Income = 100 ( In which he saves 40 % and spend 60 % which is left )

Net Rice sales = New - Old

Net Rice sales = (40*1120%) - 40

Net Rice sales = 48 - 40

Net rice sales = 8

Total consumption expenditure = New + Old

Total consumption expenditure = (60 x 15%) + 60

Total consumption expenditure = 9 + 60

Total consumption expenditure = 69