nusband and illage of Gieuudolih North family s an agricultural household that produces beans for household consumption and if their production is more han what they consume, they sell the remaining in the local market of Gicumbi, If they produce less than hey must consume, her household purchases beans from the local market. In this problem, we will answer now the welfare of Chantal's household gets affected when price of beans changes. b) What happens to the well-being (utility) of Chantal's household, i.e., the total effect of a price change in beans is ambiguous. Explain in a few sentences using the concepts of price effect and profit effect. To complete the description of Chantal's household consumption, let us assume they consume two more

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Problem 3: Agricultural Household
Chantal lives with her husband and three children in the village of Gicymbi in Northern Rwanda. Her family
is an agricultural household that produces beans for household consumption and if their production is more
than what they consume, they sell the remaining in the local market of Gicumbi, If they produce less than
they must consume, her household purchases beans from the local market. In this problem, we will answer
how the welfare of Chantal's household gets affected when price of beans changes.
(b) What happens to the well-being (utility) of Chantal's household, i.e., the total effect of a price change
in beans is ambiguous. Explain in a few sentences using the concepts of price effect and profit effect.
To complete the description of Chantal's household consumption, let us assume they consume two more
items cassava and maize, which they do not produce. The following table provides the details of their
production and consumption. Fill out the rest of the information in Table 1 to answer the following
questions.
Table 1: Production and Consumption of Agricultural Household
Household
Price per
Household
Marketed
Expenditure
on Item
Production (in
kg (in
RWF)
Item
Consumption
Surplus
kilograms)
1000
Beans
55
25
800
Cassava
15
Maize
20
900
(c) Using the information in Table 1, calculate the marketed surplus (MS) of beans.
(d) Chantal's household is a...
i. net buyer of beans.
ii. net seller of beans.
iii. neither a net buyer nor a net seller of beans.
(e) What is the household expenditure on cassava and maize? Also, calculate the total household
expenditure.
(f) Calculate the NBR of Chantal's household and interpret. [Hint: Total expenditure only includes
expenditures on the items they purchase from Gjcymbi, market.]
(g) [TRUE or FALSE] A 1% increase in beans price decreases the welfare
's
i. TRUE
ii. FALSE
(h) Last year a swarm of locusts ravaged the agricultural fields of Gicumbi, and thus the beans production
of Chantal's household was very low. This is an example of...
i. an idiosyncratic shock.
ii. a traditional shock.
iii. a covariate shock.
iv. a household shock,
Transcribed Image Text:Problem 3: Agricultural Household Chantal lives with her husband and three children in the village of Gicymbi in Northern Rwanda. Her family is an agricultural household that produces beans for household consumption and if their production is more than what they consume, they sell the remaining in the local market of Gicumbi, If they produce less than they must consume, her household purchases beans from the local market. In this problem, we will answer how the welfare of Chantal's household gets affected when price of beans changes. (b) What happens to the well-being (utility) of Chantal's household, i.e., the total effect of a price change in beans is ambiguous. Explain in a few sentences using the concepts of price effect and profit effect. To complete the description of Chantal's household consumption, let us assume they consume two more items cassava and maize, which they do not produce. The following table provides the details of their production and consumption. Fill out the rest of the information in Table 1 to answer the following questions. Table 1: Production and Consumption of Agricultural Household Household Price per Household Marketed Expenditure on Item Production (in kg (in RWF) Item Consumption Surplus kilograms) 1000 Beans 55 25 800 Cassava 15 Maize 20 900 (c) Using the information in Table 1, calculate the marketed surplus (MS) of beans. (d) Chantal's household is a... i. net buyer of beans. ii. net seller of beans. iii. neither a net buyer nor a net seller of beans. (e) What is the household expenditure on cassava and maize? Also, calculate the total household expenditure. (f) Calculate the NBR of Chantal's household and interpret. [Hint: Total expenditure only includes expenditures on the items they purchase from Gjcymbi, market.] (g) [TRUE or FALSE] A 1% increase in beans price decreases the welfare 's i. TRUE ii. FALSE (h) Last year a swarm of locusts ravaged the agricultural fields of Gicumbi, and thus the beans production of Chantal's household was very low. This is an example of... i. an idiosyncratic shock. ii. a traditional shock. iii. a covariate shock. iv. a household shock,
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