1. Assume that an agent lives for 2 periods. She has an exogenous certain endowment y1 at time 1 but {s*, s'}, exogenous uncertain endowments for 2. There are two possible states that can be realized in the future s = which makes future consumption levels uncertain as well denoted as c2,8. Probability of state sh being realized is T(s") and for s' this probability is 7(s'). Assume that financial markets are complete and time t price of an AD security that pays 1 at time 2 in state s is given by q(s). The time t quantity of the AD security that pays 1 at time t +1 in state s is denoted by x(s). Assume that households have the following utility function: cl-y U = 1-Y (a) Derive the absolute and relative risk aversion of the agent and compare it with its IES. Give proper economic explanation about the connection between risk aversion and IES.

1. Assume that an agent lives for 2 periods. She has an exogenous certain endowment y1 at time 1 but {s*, s'}, exogenous uncertain endowments for 2. There are two possible states that can be realized in the future s = which makes future consumption levels uncertain as well denoted as c2,8. Probability of state sh being realized is T(s") and for s' this probability is 7(s'). Assume that financial markets are complete and time t price of an AD security that pays 1 at time 2 in state s is given by q(s). The time t quantity of the AD security that pays 1 at time t +1 in state s is denoted by x(s). Assume that households have the following utility function: cl-y U = 1-Y (a) Derive the absolute and relative risk aversion of the agent and compare it with its IES. Give proper economic explanation about the connection between risk aversion and IES.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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please give me correct answer with calculation
Only parts d and e please
V: What are The appraaches of measuring which approach and is more ubiluty applicable and why ?
plz solve both parts within 30-40 mins I'll give upvote