Assume that there is a simultaneous increase in household income and in the opportunity cost (the price) of rearing children relative to other goods. Please analyze the possible impact of such changes on the desired number of children per family, using the microeconomic household theory of fertility’s diagram.
Assume that children are considered normal goods, like most commodities, and the number of desired surviving children is measured along the horizontal axis. Be sure to label: i. the axes; ii. the curves; iii. the initial and terminal optimum consumption bundles that maximize family satisfaction; iv. the direction the rotation of the budget line. State in words what happens to the number of desired children per family (if any). Give an example of polices that may lead to this outcome.