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Janey’s utility function is U = I0.6 where U is utility and I income in thousands...

Janey’s utility function is U = I0.6

where U is utility and I income in thousands of euros. Janey can choose between two jobs. Job A has a certain income of 9,000 euros.

Job B has a 50% chance of earning 6,000 euros and a 50% chance of earning 12,000

euros. Which job will Janey choose?

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Answer #1


U=106 ECU (W) ) [Expected Utility] ( for Jobb] - Epi UCW) - 0.5 X 6000 of 0.5 x 120006 = 232.55 Job expected Utiling = 10.6 9

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