Draw utility function over income

Assignment Help Business Economics
Reference no: EM131245323

1. Suppose that Natasha's utility function is given by u(l) = I^0.5, where I represents annual income in thousands of dollars.

a. Is Natasha risk loving, risk neutral, or risk averse? Explain,

b. suppose that Narasha is currently earning an Income of $10,000 (l == 10) and can earn that income next year with certainty. She is offered a chance ,to take a new job that offers a .5 probability of earrung $16,000 and a .5 probability of earning $5000. Should she take the new job?

c. In (b), would Natasha be willing to buy insurance to protect against the variable income associatec with the new job? If so, how much would she bt willing to pay for that insurance? (Hint: What is the risk premium?)

2. Draw a utility function over income u(I) tha describes a man who is a risk lover when his mcoall is low but a risk averter when his income is high. Can you explain why such a utility function might reasonably describe a person's preferences?

Reference no: EM131245323

Questions Cloud

Analyse actions of hotrod in relation to image restoration : PRS303 Hotrod and the Case of the Lethal Floormats Case Study. Provide advice to Hotrod's CEO and senior management on the strategies to implement in order to recover their loss in reputation. Analyse the actions of Hotrod in relation to image resto..
Should the project be accepted : If the firm has a 50% tax rate, uses straight-line depreciation, and has a 10% weighted average after-tax cost of capital, should the project be accepted?
Write functions for computing union and intersection : Write functions for computing union, intersection, and set difference on arbitrarily long bit vectors used to represent set membership as described in Section 9.3. Assume that for each operation both vectors are of equal length.
Use supply and demand curves to illustrate : Use supply and demand curves to illustrate how each of the following events would affect the price and the quantity of Toyotas bought and sold in Trinidad:
Draw utility function over income : Suppose that Natasha's utility function is given by u(l) = I^0.5, where I represents annual income in thousands of dollars. Is Natasha risk loving, risk neutral, or risk averse? Explain, Draw a utility function over income u(I) tha describes a man wh..
What is the probability that 3 students share : How many students must be in the class for the probability to be at least 50% that there are 2 who share a birthday in the same month?
Describe the social issue concerning disabilites : Explain the social model of assessment. How can you use this model even if you are working in a health facility or other setting which requires an impairment-based assessment, or any assessment that ignores societal barriers?
What is the equivalent annual worth of the operating costs : It is expected that a pump will incur operating cost of $ 2,000 for the first year and that these costs will increase $ 400 each year thereafter for the 20 year life of the pump. If the money is worth 15 % per year to the firm, what is the equivalent..
Is obesity a major health issue in the united states : Public health nurses use statistics to demonstrate the need for obesity program development and community interventions. According to CDC data in 2014, what data were identified about obesity in children and adults?

Reviews

Write a Review

Business Economics Questions & Answers

  Economics assignment

This document contains various important questions and their appropriate answers in the subject field of Economics.

  Demand and supply curves

Economics is the study of the principles governing the allocation of scarce means among competing ends when the objective of the allocation is to maximize the attainment of the ends.

  Long-run perfectly competitive equilibrium for the firm

Evaluate Government intervene and correct this situation?(a) Explain the concept of a concentration ratio. A rise in the price of magarine Explain the impact of external costs and external benefits on resource allocation long-run perfectly c..

  Supply and demand diagrams

Explain each of the following using supply and demand diagrams,  With the use of a graph, explain how these two programs affect cigarette consumption and the price of cigarettes.

  Case study: fisher-price toys

The case study of the Fisher-Price Toys, Inc., a popular case in basic economics and management from the prestigious Harvard Business School.

  Draw the production possibility curve

Draw the production possibility curve and a. Define consumer surplus and producer surplus.

  Tax revenue

The Australian government administers two programs that affect the market for cigarettes

  Maximize total welfare

How many tickets to sell to maximize total welfare.

  Difference between the cv and the ev

The change in consumer surplus (?CS) is not "theoretically" justifiable like the CV and EV but it continues to be the most widely used measure of consumer welfare change. Explain how this can be reconciled

  Depict von neumann-morgenstern utility index u in a diagram

Depict the von Neumann-Morgenstern utility index u in a diagram

  What is the market solution

What is the market solution (market price and quantity) and What is the total surplus of the society under the market solution

  Calculate gross national product and net national product

Calculate gross national product and net national product

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd