Draw a utility function over income u(I) that describes a man who is a risklover when his income is low but risk averse when his income is high.1.) Using the 3-point curved line drawing tool, draw the low income portion ofhis utility function. Label it U₁.2.) Using the 3-point curved line drawing tool, draw the high income portion ofhis utility function. Label it UH.Carefully follow the instructions above, and only draw the required objects.C500-450-400-350-300-250-200-150-100-50-0Utility20,00040,000 60,000 80,000 100,000Income

A risk lover is a person who is willing to take on additional risk for an investment that has a…

1.) Using the 3-point curved line drawing tool, draw the low income portion of his utility function. Label it UL. 2.) Using the 3-point curved line drawing tool, draw the high income portion of his utility function. Label it UH-

1.) Using the 3-point curved line drawing tool, draw the low income portion of his utility function. Label it UL. 2.) Using the 3-point curved line drawing tool, draw the high income portion of his utility function. Label it UH-

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

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Chapter1: Making Economics Decisions

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Concept explainers

Form Utility

The term utility in general refers to the satisfaction earned from usage of a particular product or service. Utility always plays an important role because it influences various important elements like demand & thereby the price of the good or service as well. Though utility is not easy to measure, various types of economic models can be used indirectly. There can be various types of utilities like economic utility, marginal utility, cardinal utility, form utility.

Question

Draw a utility function over income u(I) that describes a man who is a risk
lover when his income is low but risk averse when his income is high.
1.) Using the 3-point curved line drawing tool, draw the low income portion of
his utility function. Label it U₁.
2.) Using the 3-point curved line drawing tool, draw the high income portion of
his utility function. Label it UH.
Carefully follow the instructions above, and only draw the required objects.
C
500-
450-
400-
350-
300-
250-
200-
150-
100-
50-
0
Utility
20,000
40,000 60,000 80,000 100,000
Income

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Step 1: Introduce the concept of risk lover and risk averse.

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Step 2: 1) Draw the low income portion of his utility function.

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Step 3: 2) Draw the high income portion of his utility function.

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