Suppose that natasharsquos utility function is given by, Ask an Expert

Economics

Suppose that Natasha’s utility function is given by: u(I)=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 Natasha is currently earning an income of $10,000 per year (I=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 earning $16,000 and a .5 probability of earning $5000. Should she take the new job?

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M92001385

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