2. *) (1+1+(1+1)+1+1-6) According to the household fertility theory, the decisio
ID: 1114425 • Letter: 2
Question
2. *) (1+1+(1+1)+1+1-6) According to the household fertility theory, the decision mechanism for having an additional child involves calculating the private economic benefits and costs. Define price of children as Private Economic Cost Private Economic Benefit [Opportunity cost of mother's time Cost of education of Children] - [income from child labor + future support for parents] Now, consider demand and supply side policies discussed in "Poor Economics". If as Robert Jensen did in 2002, young women in rural areas of India, with a certain level of education are employed into BPOs (which raises their wage rate), then answer how opportunity cost of mother's time is affected. Choose from [increases/decreases/stays the same] If more government schools are established in the rural areas of Indonesia where education is given for free and books and all school/study materials are provided for free, then how is cost of education of children affected? Choose from [increases/decreases/stays the same] Assume income from child labor and future support for parents are unchanged for each of the following a. Policy A increases/ decreases demand for children? b. Policy B increases/ decreases demand for children? Policy A is demand side/supply side? Policy B is demand side/ supply side? iv.Explanation / Answer
Answer (i) : Oppournity cost of mother time is increases as if they gave birth to the child than they do not work in the BPO. This result in the activity foregone cost has been increases tremoundsly in this time as the result price of the child has been increased because cost of giving birth to child increases.
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Answer (ii) Cost of education given to the children has been decreased at a greater phase because now the government school has opened so education is provided free of cost all study material should be provided free.
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Answer (iii) a : Policy A decreases demand for children because women are working in BPO if they go for a birth of a child than the result is increase in oppournity cost of giving birth to child by a women.
b : Policy B increases the demand for children because as a result is that now the cost of education has been decreased and children demand has been increased because now giving birth is cheaper as cost of education is less.
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Answer (iv) Policy A affect the supply side as now women are less interested in giving birth to the child as they are engaged in working in BPO than ultimately supply of women decreases .
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Answer (v) : Policy B affect the demand side as more children are demanded in an economy because the cost of education is free so price of the child get cheaper in an economy where education is provided free of cost in an economic scanerio.
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