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Classifying the utility functions as risk loving, risk neutral or risk averse.

Shaqueena's utility function is given by U= I1/2, where I represents annual income in thousands of dollars.

a) Is Shaqueena risk loving, risk neutral or risk averse?

b) Suppose Shaqueena is currently earning income of $23,000 (I =23) and can earn which income next year with certainty. She is offered a chance to take a new job which offers a 0.5 probability of earning $25000 and a 0.5 probability of earning $16000. Should she take the new job?

Business Economics, Economics

  • Category:- Business Economics
  • Reference No.:- M917135

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