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Questions and Answers
What is the utility function for both agents?
What is the utility function for both agents?
- $u(c) = rac{1}{c}$
- $u(c) = ln(c)$ (correct)
- $u(c) = c^2$
- $u(c) = e^c$
What is the optimal consumption for agent a in state i, given the set of state prices $q_1, ..., q_N$?
What is the optimal consumption for agent a in state i, given the set of state prices $q_1, ..., q_N$?
- $c_{a,i}^* = rac{ ext{Σ} q_i (z_i - 1 + h_i)}{ ext{π}_i q_i}$
- $c_{a,i}^* = rac{q_i}{ ext{Σ} ext{π}_i (z_i - 1 + h_i)}$
- $c_{a,i}^* = rac{ ext{Σ} ext{π}_i q_i (z_i - 1 + h_i)}{q_i}$
- $c_{a,i}^* = rac{ ext{π}_i q_i}{ ext{Σ} q_i (z_i - 1 + h_i)}$ (correct)
What is the income of agent b in state i?
What is the income of agent b in state i?
- $y(b)_i = z_i + 1 - h_i$
- $y(b)_i = z_i - 1 - h_i$ (correct)
- $y(b)_i = z_i - h_i$
- $y(b)_i = z_i - 1 + h_i$
What is the market-clearing condition to solve for the price $q_i$ as a function of $z_i$ and $ ext{Ï€}_i$?
What is the market-clearing condition to solve for the price $q_i$ as a function of $z_i$ and $ ext{Ï€}_i$?
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What is the optimal consumption for agent b in state i, given the set of state prices $q_1, ..., q_N$?
What is the optimal consumption for agent b in state i, given the set of state prices $q_1, ..., q_N$?
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