Now, repeat Question 2, but with the following different assumption on preferences. If we denote goods consumption by G and leisure by L, assume that the household's preferences are such that the marginal rate of substitution between labor and leisure (or the marginal utility of leisure divided by the marginal utility of goods consumption) is equal to G / L. (This is another way of saying that the utility function is Cobb-Douglas with equal weights on goods and leisure.)
(a) Suppose that the price of rice is equal to 1. How much total labor is done by the household? How much child labor? Illustrate using a diagram with the household's budget line and indifference curve at the optimum.
(b) Now, suppose that the price of rice is equal to 1.5, because rice is an export good and the cost of shipping the rice abroad has fallen. Repeat the analysis in part (a).
(c) Now, repeat for a household that makes manufactures.
(d) In this model, what effect does globalization have on child labor? Explain. (If you can interpret in terms of income and substitution effects, all the better.)