An individual has 40,000 in income per year. The person will get sick with probability 0.1. If he does get sick, the medical bills will total 30,000. The following tables shows the utility derived from certain amounts of income: Income Utility 40,000 200 37,000 195 35,000 190 30,000 170 20,000 140 10,000 100 Considering the probability of illness, what is the expected utility of income without insurance? Show your work.
An individual has 40,000 in income per year. The person will get sick with probability 0.1. If he does get sick, the medical bills will total 30,000. The following tables shows the utility derived from certain amounts of income: Income Utility 40,000 200 37,000 195 35,000 190 30,000 170 20,000 140 10,000 100 Considering the probability of illness, what is the expected utility of income without insurance? Show your work.
Chapter7: The Market For Health Insurance
Section: Chapter Questions
Problem 7QAP
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An individual has 40,000 in income per year. The person will get sick with probability 0.1. If he does get sick, the medical bills will total 30,000. The following tables shows the utility derived from certain amounts of income:
Income Utility
40,000 200
37,000 195
35,000 190
30,000 170
20,000 140
10,000 100
Considering the probability of illness, what is the expected utility of income without insurance? Show your work.
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