Question

help with math for number 1 please!

Suppose you are an average household in a developing nation. You are always trying to maximize your happiness (utility) by choosing the best possible combination of "food" (X) and number of children (C): max U U,X Your choices of food and children are of course constrained by your level of income in any given period: Ye Pix PcC. The price of food (P) is 1 and the "price" of raising children (Pc) is 100. You will live for two periods and your income in each of the two periods are: . Period 1 income (Y) 1,400 .Period 2 income (Y2) 200 2 In order to survive (obtain subsistence level consumption) you have to consume at least 500 units of food (min X,- X2 500). Clearly you are facing a difficult problem since your second period income (000) is less than subsistence consumption (500). The only way to increase your setond period income is to have male children that will be able to support you during "old-age" (period 2) (only men work and females leave the family upon marriage). Suppose the probability of having a male child is biologically 0.5 and the probability that a male child will be able to support you in old age is 0.5. Any male child in good employment will provide support of 200 in period 2 How many children will you choose to have? 1. 900 500 100 1400 800 500 100

Answer 1

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