1. Jo has income of $1,000 and is risk-averse in terms of utility level as a function of income. Would Jo receive greater, less, or the same marginal utility with a $1 increase in income as compared to a $1 decrease in income? Does your answer change if Jo were risk loving? What about if Jo is risk-neutral? Explain. (It may help to think about each case in the context of the shape of the respective utility curves as described in the chapter on “Uncertainty.”)
She would get lesser extra utility with a $1 increment in wage contrasted with a $ 1 diminish in salary
The reason, she is risk averse which means she values the same increment lesser than a decrement. She does not value higher wealth in a proportional way.
For a risk-loving person, opposite will happen, she would get higher additional utility with a $1 increase in income compared to a $ 1 decrease in income.
Hazard adoring individual gives more weight to pick up than a similar measure of misfortune.
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