anonymous
  • anonymous
What would a risk-seeking person's utility curve look like? What would a risk-averse person's utility curve look like?
OCW Scholar - Principles of Microeconomics
  • Stacey Warren - Expert brainly.com
Hey! We 've verified this expert answer for you, click below to unlock the details :)
SOLVED
At vero eos et accusamus et iusto odio dignissimos ducimus qui blanditiis praesentium voluptatum deleniti atque corrupti quos dolores et quas molestias excepturi sint occaecati cupiditate non provident, similique sunt in culpa qui officia deserunt mollitia animi, id est laborum et dolorum fuga. Et harum quidem rerum facilis est et expedita distinctio. Nam libero tempore, cum soluta nobis est eligendi optio cumque nihil impedit quo minus id quod maxime placeat facere possimus, omnis voluptas assumenda est, omnis dolor repellendus. Itaque earum rerum hic tenetur a sapiente delectus, ut aut reiciendis voluptatibus maiores alias consequatur aut perferendis doloribus asperiores repellat.
schrodinger
  • schrodinger
I got my questions answered at brainly.com in under 10 minutes. Go to brainly.com now for free help!
anonymous
  • anonymous
I guess, how do they compare to someone who is risk neutral
anonymous
  • anonymous
Cool stuff, we have two functions for utility here: (1.) risk-seeking or risk-loving, and (2.) risk-averse. They are opposing concepts, so their functions will essentially be near inverses of each other.
anonymous
  • anonymous
What happens when you're risk-averse?

Looking for something else?

Not the answer you are looking for? Search for more explanations.

More answers

anonymous
  • anonymous
seems that you are willing to forgo opportunities to gain that have uncertain probabilities
anonymous
  • anonymous
sorry, *unwilling
anonymous
  • anonymous
heh, right, so risk-seeking is *willing
anonymous
  • anonymous
If you had a gamble: say 50/50 you could win $10..so with p=.5 you could win $10, and with p=.5 you could win $0. So the expected pay out is (.5)*10 + (.5) * 0 = $5. A risk averse person would rather take a certain smaller amount than the expected amount then engage in the gamble.
anonymous
  • anonymous
The expected utility of the gamble would be less than a value on that risk-averse person's utility curve (therefore within the area bound by the curve), and therefore of less utility. But for the risk-seeking person, it's the exact opposite situation. You'd almost have to pay the risk-lover to not take the gamble. Then the expected utility of the gamble would fall above the utility curve, and therefore of more greater utility
anonymous
  • anonymous
|dw:1330492055083:dw|
anonymous
  • anonymous
Risk averse, shows decreases increases in utility here
anonymous
  • anonymous
|dw:1330492155490:dw| Risk loving shows increasing increases in utility here
anonymous
  • anonymous
|dw:1330492198982:dw| Risk neutral is doesn't care!

Looking for something else?

Not the answer you are looking for? Search for more explanations.