A typical household in Avalon has an income of $160,000 per year, which they spend on...

 

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A typical household in Avalon has an income of $160,000 per year, which they spend on food (good x) and clothing (good y). Their preferences over consumption baskets are represented by the utility function, < The associate marginal utilities are, U = x1/3y1/3 y1/3 MUX X1/3 3x2/3 and MUy 3y2/3 k The price of food is Px = www $8 per meal, and the price of clothing is Py = $100 per item. Each household has a 20% probability of experiencing a major injury or illness in any given year. If a household experiences a major injury or illness, its income will be reduced to $20,000 per year. A typical household in Avalon has an income of $160,000 per year, which they spend on food (good x) and clothing (good y). Their preferences over consumption baskets are represented by the utility function, < The associate marginal utilities are, U = x1/3y1/3 y1/3 MUX X1/3 3x2/3 and MUy 3y2/3 k The price of food is Px = www $8 per meal, and the price of clothing is Py = $100 per item. Each household has a 20% probability of experiencing a major injury or illness in any given year. If a household experiences a major injury or illness, its income will be reduced to $20,000 per year.