Mathematics
Mathematics, 01.11.2019 03:31, mismhan01

If u(y) denotes an individual’s utility of having income (or consumption) y, then r = − yu00(y) u 0(y) is called the coefficient of relative risk aversion. (r/y is called the degree of absolute risk aversion.) compute r for the following utility functions (where a1, a2, and rho are positive constants with rho 6= 1, and we assume that y > 0): (a) u(y) = a1 − a2y −2 (b) u(y) = a1 + a2y 1−rho 1 − rho .

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If u(y) denotes an individual’s utility of having income (or consumption) y, then r = − yu00(y) u 0(...

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