1. Agriculture is like a “black box,” supplying labor and other resources to support industrialization, and it’s share of GDP decreases as growth occurs. Thus, investing in agriculture should not be a priority of development policies. Please critique. In the poorest countries most rural households are involved in agriculture. Agriculture is a fascinating and crucial sector of the economy. Virtually all countries start out with economies based primarily on agriculture, but agriculture’s shares of GNI and national employment fall as economies grow. It would seem then, that agriculture starts out being important but becomes less so over time.
2. What is the agricultural household model, and why is it useful? Consume part or all of what they produce. They also supply many of their own inputs, particularly land and labor. This model has to reflect agricultural households’ dual nature as both producer and consumer to provide a reliable basis for understanding the agricultural economy and offer guidance for designing policies.
3. Is the demand curve for food in agricultural households upward-sloping? If so, how can it be? Yes, the farm household produces at the point where the food price equals the marginal cost of producing food. When the food price rises, so does food production.
4. Why do subsistence households not participate in the market? Would they be better off if they did? Subsistence production increases when the market price falls, due to the labor market linkage. The same argument holds, ceteris paribus, for other factors.
5. How can power asymmetries within households affect spending and even efficiency? The Nash-bargained model described above assumes there is no reason why households would not maximize their incomes, even if power relations within households affect expenditures. If someone in the household could be made better off wthout making others worse off, the household economy is said to be not Pareto efficient.
6. What are the key insights and critiques of the Lewis two-sector model? Agricultural sector has low productivity, whilst the modern industrialised urban sector has the potential to be far
