I have posted the lecture note for this evening; see http://economics.garven.com/fall2009/lecture7.ppt for the PowerPoint version and http://economics.garven.com/fall2009/lecture7.pdf for the Acrobat version. 

The game plan for this evening is to focus our attention on the following set of topics (mostly taken or further developed from pp. 444-457 of Chapter 13):

  • Expected value model
  • Expected utility model
  • Risk preferences (risk aversion, risk neutrality, risk loving)
  • Risk Analysis Class Problem
  • The Demand for Insurance

I will post the solutions for the problem set sometime after class starts this evening.  Although I do not plan to spend class time to go over these solutions, I will stick around after class is over in case if anyone has any specific questions concerning the problem set.   Obviously , you may also avail yourself of the solutions and subsequently call or email me with your questions.

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