2. If h(y) denotes an individual's happiness (called “utility" in economics) when having income Y, then yh" (y) h'(y) R(y) is called the coefficient of relative risk aversion, which measures how much an indi- vidual is willing to take risks. Compute R for the following utility functions, where a, b, c, d are constants ay + 6 h(y) = (ay + b)°, h(y) cy +d° In the computations, you can assume that no denominator is 0. Simplify as much as possible.

2. If h(y) denotes an individual's happiness (called “utility" in economics) when having income Y, then yh" (y) h'(y) R(y) is called the coefficient of relative risk aversion, which measures how much an indi- vidual is willing to take risks. Compute R for the following utility functions, where a, b, c, d are constants ay + 6 h(y) = (ay + b)°, h(y) cy +d° In the computations, you can assume that no denominator is 0. Simplify as much as possible.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter7: Uncertainty

Section: Chapter Questions

Problem 7.5P

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