Construct an asymmetric value function diagram

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Reference no: EM132207481

Quesiton: 1. Suppose that a person is loss averse and has a value function v(x) = x for gains and v(x) = 3x for losses.

a) Construct an asymmetric value function diagram depicting this person's preferences.

b) Construct another diagram depicting a single indifference curve between apples (on horizontal axis) and bananas (on vertical axis) that would result from the above asymmetric value function. Assume that the person's initial endowment is Apples = 3 and Bananas = 4.

Reference no: EM132207481

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