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What is the expected income of lottery

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Reference no: EM132812819

X and Y are offered a lottery where they have a 50% chance of winning $200 and a 50% chance of winning 0. This means that in this lottery, p=0.5.

a. What is the Expected Income of this lottery?

b. Calculate the Expected Utility of the lottery for each person. Now calculate the Utility of the Expected Income of this lottery for each person. Are X and Y risk averse? How do you know?

c. Given your answer from c, what can you say about how X and Y's value for money changes as they get more money?

Reference no: EM132812819

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