Fertility vs Literacy Rate
Vimal Kumar Rai A0067543B
BMU5003 Economic Analysis For Managers Dr. Ivan Png
Individual Assignment 21 April 2010
1. Fertility (D12010, #1)
a. Referring to the linear trend : (i) If the literacy rate is 60%, what is the fertility rate? (ii) If the literacy rate is 100%, what is the fertility rate?
Answer (i) : 7.8 Answer (ii) : 1.4
b. A large cost of having a baby is the time that a mother must invest to bear and rear the child. For a more educated woman, is the value of this time higher or lower?
Answer : For a more educated woman the value of this time is higher. Assuming the higher level of literacy has come about with the investment of time and money (outflow) into education, and consequently that the return on this investment will only be generated by starting to work and earning money (inflow), then it follows that the opportunity cost of having a baby will be higher than for someone who has not invested in education. A more educated woman is more likely to take into account the cost of the loss of income and hence is more likely to have none or fewer children. She is also more likely to compute the cost of the additional time that will be needed to be spent with a child (or more than one child) and hence decide to have no children or fewer children (especially since the amount of time available per day is finite and identical for everyone i.e. 24hrs).
c. In the chart mark “cost of child” on the vertical axis. Does the trend line have any relation to a demand curve? Please explain.
Answer : Yes it does; it is identical in reasoning. The higher the price (i.e. the cost of bearing and rearing the child) the lower the quantity demanded (i.e. the number of children birthed/desired). The cost can be perceived or actual. The other assumption is there is diminishing marginal returns setting in i.e. as the costs of bearing and rearing multiply by the number of children, or as the
BMU5003 Economic Analysis For Managers Dr. Ivan Png
Individual Assignment 21 April 2010
1. Fertility (D12010, #1)
a. Referring to the linear trend : (i) If the literacy rate is 60%, what is the fertility rate? (ii) If the literacy rate is 100%, what is the fertility rate?
Answer (i) : 7.8 Answer (ii) : 1.4
b. A large cost of having a baby is the time that a mother must invest to bear and rear the child. For a more educated woman, is the value of this time higher or lower?
Answer : For a more educated woman the value of this time is higher. Assuming the higher level of literacy has come about with the investment of time and money (outflow) into education, and consequently that the return on this investment will only be generated by starting to work and earning money (inflow), then it follows that the opportunity cost of having a baby will be higher than for someone who has not invested in education. A more educated woman is more likely to take into account the cost of the loss of income and hence is more likely to have none or fewer children. She is also more likely to compute the cost of the additional time that will be needed to be spent with a child (or more than one child) and hence decide to have no children or fewer children (especially since the amount of time available per day is finite and identical for everyone i.e. 24hrs).
c. In the chart mark “cost of child” on the vertical axis. Does the trend line have any relation to a demand curve? Please explain.
Answer : Yes it does; it is identical in reasoning. The higher the price (i.e. the cost of bearing and rearing the child) the lower the quantity demanded (i.e. the number of children birthed/desired). The cost can be perceived or actual. The other assumption is there is diminishing marginal returns setting in i.e. as the costs of bearing and rearing multiply by the number of children, or as the