Consider a full insurance product that guarantees this individual E[I]. How to draw a diagram in U?
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Consider a full insurance product that guarantees this individual E[I]. How to draw a diagram in U? I space? How to draw the individual's utility curve and the lines representing IS, IH, and E[I].? And draw and label a line segment that corresponds to the utility gain, ?U, from buying this insurance product.? Also to draw another line segment, M, which corresponds to the consumer surplus from the purchase of insurance (that is, the monetary value of the utility gain from buying insurance).
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