Answer to Question #74508 in Microeconomics for Akanksha
1) The expected value of his income is:
I = 0.5*36000 + 0.5*16000 = 26000.
2) Expected utility he will have given the possible state of his health is:
u = 26000/1000*1/2 = 13.
3) The risk premium is 50% to cover the possibility of illness.
Need a fast expert's response?Submit order
and get a quick answer at the best price
for any assignment or question with DETAILED EXPLANATIONS!
please use panel for submitting new questions
please mam elaborate 3rd part ? risk premium ?