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Determining the two different lotteries

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Reference no: EM131195005

In this section, write whether each statement is True or False. Please fully explain your answer, using a diagram if appropriate. No credit will be given for an answer without an explanation.

  • A risk averse individual that has to decide between two different lotteries will always prefer a lottery with less risk.
  • Steven only consumes two goods: X and Y. If X is a Giffen good for Steven, then Y must be a normal good for Steven.
  • Ann and Bob consume clothes (C) and food (F) only. Ann's utility function is U (C, F) = aA ln C +bA ln F, and Bob's utility function is U (C, F) = aB ln C + bB ln F. aA ,bA , aB ,bB > 0 . The price of clothes is PC, and the price of food is PF. Ann and Bob must have the same marginal rates of substitution (MRS) of clothes for food at the optimal level of consumption.
  • If S and F are perfect complements you must be indifferent between these two bundles:
  • One unit of S and one unit of F

  Two units of S and one unit of F

Reference no: EM131195005

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