Question

# if u(y) denotes an individuals utility of having income, then

R= -yu''(y)/u'(y)

' means

prime

is the coefficient of relative risk aversion. (Ra = R/y is the degree of absolute risk aversion.) Compute R for the following utility functions (where A1, A2, and p are positive constants with p does not equal 1, and we assume that y>0:

A). u(y) = A1-A2y^-2

B). u(y) = A1+ A2y^(1-p)/(1-p)

#### Top Answer

A) Utility function is given as: u ( y ) = A 1 A 2 y 2 First and second order derivative can be... View the full answer