Illustrates the partial but fair contract is preferred

Reference no: EM133425900

Question: Diagram an income utility curve with two points representing a sick state (IS) and a healthy state (IH). Now diagram two types of insurance: Partial but Fair and Full but Unfair. In doing so, assume that each state happens with a 50% probability. Make your diagram in a way that illustrates the Partial but Fair contract is preferred to the Full but Unfair contract. You should clearly label the expected income from each contract on the x-axis and the expected utility from each contract on the y-axis.

Reference no: EM133425900

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