Answer to Question #288188 in Microeconomics for Likenaw

Question

Consider a farmer in a rural village and a business man in an urban area that adopt various

risk reduction strategies in Ethiopia. Assume also that most farmers in Ethiopia do not

insure for crop and livestock failure and businessmen also hardly insured against property

loss.

A) Suggest at least two strategies adopted to reduce risk by each agent?

B) Explain concisely how each strategy can reduce risk by agents?

Answer 1

A. Farmer

• identify action step
• Avoidance of risk

Businessman

• Identify performance indicators
• shift to the demand of the consumer

B. Identify action steps in terms of what is needed to be done to increase production of livestock and crops to increase the yields and avoid incurring a loss.

Avoid risk by using proper tools for fertilizers pest and disease control that would otherwise jeopardize the produce.

Businessman

identify performance indicators that would enable the business to boom and improve on what should be done.

shifting to the demand of the customers allows the business to be in the competitive market.