Question

The price of wheat is very low this year, and the most I can get from the crops is $35,000. If I paid you the same amount as I paid the same amount as I paid you last year ($30,000). I'd lose money because I also have to worry about the $20,000 I paid three months ago for the seed and fertilizer. I'd be crazy to pay a total of $50,000 to harvest a crop I can sell for only $35,000. if you are willing to work for half as much as last year ($15,000),my total will be $35,000, so I'll break even. if you don't take a pay cut, I won't harvest the wheat.

Is the farmer bluffing, or will the farmers lose their jobs if they reject the proposed pay cut?

Answer 1

This year the price of wheat is low. Hence the only profit is $35000. But if he paid $30000 to the farmer then the only cash in hand will be $5000. But the total amount paid to harvest is $50000. So there is definitely a loss running in the entire programme. So if the proposed tax cut is accepted by the farmers, then there will be a light at the end of the tunnel. So if the farmers reject the proposed pay cut then they won't get any payment. And will definitely lose the job for this year.