2. Preferences and Utility Functions
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YouTubeMIT OpenCourseWare
2. Preferences and Utility Functions
MIT 14.01 Principles of Microeconomics, Fall 2018 Instructor: Prof. Jonathan Gruber * View newer version of the course: https://ocw.mit.edu/14-01F23 * YouTube Playlist: https://www.youtube.com/playlist?list=PLUl4u3cNGP62oJSoqb4Rf-vZMGUBe59G- This video focuses on the demand curve, derived from how consumers make choices, and the supply curve ...
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Your utility function is U=√(C), where C is the amount of consumption that you have in any given period. Your income is 40,000 per year, and there is a 2 % chance that you will be involved in a catastrophic accident that will cost you 30,000 next year. a. What is your expected utility? b. Calculate an actuarially fair insurance premium. What would your expected utility be were you to purchase the actuarially fair insurance premium? c. What is the most that you would be willing to pay for insur
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