Business

Wayne Mcmahon

1 April, 13:55

In a developing country, there is a poor household that owns a small

land on which they grow corn. They eat part of the corn and sell the rest

of it. The value of corn a household produces (when valued at the market

price) is the equivalent of 30 percent of its income or consumption

expenditure and the value of the corn it consumes (when valued at the

market price) is the equivalent of 80 percent of its consumption expenditure.

A) Is the household a net buyer or net seller?

B) By how much does the household's real purchasing power increase

/decrease if the price of corn rises 20 percent? Calculate.