(d) u2(r) and uz(x) are related. How? [Hint: take the limit of u2(x) asp → 1 byusing l'Hopital's rule.](e) u1 (x) is known as CRRA utility, while u2(x) is known as CARA utility. Why? The questions below refer to the following utility functions, which are often used inapplications. Here r is the agent's income or wealth, and p and a are parameters:• u (x) = 1– en.u2(x) = -11-pu3(r) = In(r)• us(x) = axus(x) = r – ar?

In economics, utility functions are defined as the individual preferences for commodities apart from…

Answered: (d) u2(x) and u3(x) are related. How?…

(d) u2(x) and u3(x) are related. How? [Hint: take the limit of u2(x) as p → 1 by using l'Hopital's rule.] (e) uz (x) is known as CRRA utility, while uz(x) is known as CARA utility. Why?

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

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Chapter1: Making Economics Decisions

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(d) u2(r) and uz(x) are related. How? [Hint: take the limit of u2(x) asp → 1 by
using l'Hopital's rule.]
(e) u1 (x) is known as CRRA utility, while u2(x) is known as CARA utility. Why?

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