Tao is a small farmer in Thailand. Like most rural households in this country, Tao's family grows rice. Part of the rice they consume themselves and part of it they sell in the market. From the proceeds they purchase meat. Assume that both rice and meat are normal goods. Use graphs to answer the following questions:

1. What happens to the consumption of rice and meat by Tao's household when the price of rice rises? What happens to the amount of rice sold in the market?

1. Due to unusual weather conditions the current growing season has been particularly bad for Tao. His harvest fell far short of its normal level and is insufficient to feed his family, let alone to sell any surplus. Fortunately, Tao's uncle in Bangkok is sending some money so that Tao can buy additional rice and meat. How would the family's consumption of rice and meat react to a rise in the price of rice now?

1. What does this question have to do with the standard model of labour supply?

1. How could you use the Ordinary Least Squares (OLS) estimator to empirically test the standard model of labour supply if you would have data on hours worked per week and weekly earnings? What are the potential drawbacks of using OLS? What alternative estimator and data could address (some of) these drawbacks?