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 ау +b h(y) = (ay + b)°, h(y) су + d'

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 ау +b h(y) = (ay + b)°, h(y) су + d'

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter7: Uncertainty

Section: Chapter Questions

Problem 7.7P

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