# Economic

Suppose that Betsy’s utility function is given by the equation U=Y0.3 where Y is measured in thousands of dollars. Betsy’s current job pays her \$20,000 per year and she can earn this amount next year with certainty. Betsy is offered a different job but in this new job, Betsy has a 50%
chance of earning \$36,000 and a 50% chance of earning only \$15,000.

a) Should Betsy take the new job?
b) Does your answer change if Betsy’s utility function is U=Y0.9? Why?
c) Does your answer change if Betsy’s utility function is U = Y1.25? Why?

A)

0.5(36,000) + 0.5(15,000)
=\$25,000

B)

0.5(36,000)^0.3 + 0.5(15,000)^0.3
= 20.58

0.5(36,000)^0.9 + 0.5(15,000)^0.9
=9,013.70

C)

0.5(36,000)^1.25 + 0.5(15,000)^1.25
= 330,942.01

1. 👍 0
2. 👎 0
3. 👁 38

## Similar Questions

1. ### Micro econ

1: Suppose John had a utility function of U=X^2/3Y^1/3 . Derive Johns demand function from his utility function showing all the necessary steps. i know that the MUx=MUy and first i derive the equation to 2/3X^-1/3 1/3Y^-2/3 then

asked by Brett on September 19, 2007
2. ### Economics

Ive been stuck on this forever now if someone could please walk me through it i was appreciate it: 1: Suppose John had a utility function of U=X^2/3Y^1/3 . Derive Johns demand function from his utility function showing all the

asked by Brett on September 18, 2007
3. ### microeconomics

Suppose a person has a utility function U=YX. What is the minimum level of income required to get a utility of 20? Your answer should be a function of, among other things, Px and Py.

asked by jon on September 21, 2007
4. ### economics

Suppose a person has a utility function U=YX. What is the minimum level of income required to get a utility of 20? Your answer should be a function of, among other things, Px and Py.

asked by jon on September 21, 2007
5. ### economics

1.. Suppose that U(x; y) = min(x; y) with px = 1 and py = 1. Describe and illustrate the income and substitution effects of an increase in the price of good y. What does this imply about a tax imposed on good y.. 2.. Let U(x; y) =

asked by Anonymous on February 22, 2014
6. ### Pre-Calculus

1) Use a graphing utility to obtain the graph of the function. Give the domain of the function and identify any vertical or horizontal asymptotes. x+4/ x^2+x-6. 2) Use a graphing utility to graph the function and determine the

7. ### Economics

Luis’s utility function is u=x^.4y^.6 Suppose that Luis wants to get 60 utils, provide 4 bundles with which he can achieve that level of utility. Please explain

asked by Sara on February 1, 2016
8. ### Indifference Curves

For each example below, draw a set of three indifference curves that represent the given preferences. Be certain to show the direction of increasing utility. Also write down a utility function that would be consistent with the

asked by Stan on August 8, 2009
9. ### Economics

Suppose Fred and Ethel need to divide 20 pizza slices and 10 cans of beverage. Fred's utility function is given by the equation U=Min(Z,B), where Z is the amount of pizza and B is the amount of beverage. Ethel's utility is given

asked by Brett on February 18, 2009
10. ### college Econ

Suppose Fred and Ethel need to divide 20 pizza slices and 10 cans of beverage. Fred's utility function is given by the equation U=Min(Z,B), where Z is the amount of pizza and B is the amount of beverage. Ethel's utility is given

asked by Brett on February 19, 2009

More Similar Questions