I need some help with this ! Thank you ! A .consumer’s utility function is (as shown below) where w is wealth. His initial wealth consists of $4 plus a lottery ticket which pays off $12 with probability 1/2 and $0 with probability 1/2. This consumer’s preferences over lotteries obey the expected utility hypothesis. .
Suppose p denotes the lowest price at which this consumer will willingly . part with his lottery ticket.
.~ (a) (b) A consumer’s utility function is u(to) = to“ where to is wealth. Hisinitial wealth consists of- 34 plus a lottery ticket which pays of 812with probability 1/2 and $0 with probability 1/2. This-consumeflspreferenoes over lotteries obey the expected utility hypothesis. Suppose p denotes the lowest price st which this consumer will willingly ‘part with his lottery ticket. Show that it _ ’01 +31)“ 11101 + p) + 1(ln16)16" 4. 10,14)”d“ ._ 06”)“ Hint: although in” is 93"“, if is y’lny.Doespinereaseor decreasensa increases slightly from or =1? (HEDU’do not have a calallator or for any other reuon you do not wish tonumerically simplify your answer, that is fine; as long as your answerhas only numbers and no variables, it is simplified enough. You shouldexplain how you would answer the question__if you had a calculator, though.)
