Mamata, being a landowner who has a preference to allocate the resources (time, income from… 1 answer below »

Q6
Mamata, being a landowner who has a preference to allocate the resources (time, income from working) in such a way that the bundle chosen provides her with an optimal amount of utility. The opportunity cost of working longer is the leisure time which could have been utilized for other activities which is the next best alternative for the landowner. Feasible allocation contains all the points where the trade-off is achievable given the limited resources and the IC curve details all the allocations on it that provide the landowner with the same level of utility. Mamata has a time constraint of 24 hours which could be allocated in the best possible way, given that, if she works for 24 hours (which means with 0 hours of leisure she could produce 4 tonnes of rice. Her utility-maximizing bundle is where she consumes 3 tonnes of rice with 16 hours of leisure and is represented by IC2 on the diagram. The input here is the time spent in working in the rice field and the output is the income (rice) produced. With the increase in income initially, choosing work (income) over leisure is due to the substitution effect which outweighs work over leisure. Mamata doesn't allocate all her time in working as with rise in income (rice) there is an Income effect that outweighs the effect of the Substitution of leisure for rice production. According to the diagram, IC3 is not feasible due to limited resources and IC2 is attainable but not efficient due to the underutilization of resources. The utility-maximizing bundle here is represented where the feasibility frontier is tangent to the IC curve (utility curve).
Q7
With the Introduction of Operation Barga, the incentives gained by Mamata by working in a field have decreased as she needs to share the rice produced with the landowner and she is only left with three-fourth of the crop produced. Due to this, the maximum she could gain by working in the rented field for 24 hours is 4 tonnes of crop out of which 1 tonne is to be given to the landowner. Mamata needs to consider the trade-off of resources she is left with, in such a way that her utility gets maximized. She will get only 3 tonnes of crop if she works for 24 hours. However, with the decrease in the incentives to work more the IC curve shifts down to IC2 with less amount of utility. The feasible frontier curve moves such that the allocation is to be made between 24 hours of work and 3 tonnes of trade (ignoring the 1 ton of crop that is given to the landowners in form of rent). There is no change in the allocated time but the gains from working in the field decrease to a maximum of 3 tonnes. She will experience a loss in terms of utility and the new utility-maximizing bundle is such that with more hours of work, she gains less crops due to the Operation Barga. IC2 is the new IC on which the utility-maximizing bundle lies which reduced the amount of leisure, L and decrease income, W. With lesser incentives to work, Mamata works with reduced productivity which increases the hours worked but decreases the income earned with a maximum of 3 tonnes for own consumption. (M. Raquibuz Zaman,1973) The shift of Mamata from a landowner to sharecropper makes her worse off, however, if she would have gained the same amount of yield when she was a sharecropper (first part), the utility and incentives of her should have increased. This indicates that the ownership of the land and then the share of crop from the production describes the change in utility through it. Assumptions: Now, tradeoff will happen between 3 tonnes of crop and 24 hours of work as 3 tonnes is the maximum that sharecropper will get (if he works for 24 hours)
Less incentivizing for the sharecropper, Leisure gives more pleasure i.e. Substitution effect between leisure and wage outweighs Income effect.