Consider an individual whose utility function over income I is U(I), where U is increasing smoothly in I (U' 0) and convex (U'' 0) (a) Draw a utility function in UI space that ts this description (b) Explain the connection between U and risk aversion (c) True or false this individual prefers no insurance to an actuarially fair, full contract

Question: Consider an individual whose utility function over income I is U(I), where U is increasing smoothly in I (U'>0) and convex (U''>0) (a) Draw a

Consider an individual whose utility function over income I is U(I), where U is increasing smoothly in I (U'>0) and convex (U''>0)

(a) Draw a utility function in U−I space that ﬁts this description.

(b) Explain the connection between U’’ and risk aversion.

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