Given utility function U = -e -Y . a. Show that the coincident of absolute risk aversion R A (Y)=…
For the code described in the preceding problem, find the code words [T 1 ] and [T 2 ]…
August 8, 2017In a state-contingent income space, each person’s indifference curves are generally bowed in…
August 8, 2017Given utility function U = -e -Y . a. Show that the coincident of absolute risk aversion R A (Y)=…
Given utility function U = -e-Y.
a. Show that the coincident of absolute risk aversion RA(Y)= U”/U’ is constant (where U’ and U’’ denote the first and second derivative of U with respect to Y, respectively).
Show that U’ > 0 (positive marginal utility of income) and that U”
b. Show that the undeclared income, Y – X, is independent of Y for a consumer with this utility function.
