Unformatted text preview: 2. For a utility function u ( x ) the measure of Relative Risk Aversion is defined as R ( x ) =-x × u ( x ) 00 u ( x ) . Consider the utility function u ( x ) = x 1-r-1 1-r , where r is some parameter, r ∈ (0 , 1). Show that this utility function is for risk-averse consumer (concave utility/negative second derivative). Show that this utility function exhibits Constant Relative Risk Aversion. Find the value of this constant. 1...
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- Fall '10