It is flu season.When you are healthy,you will earn $144 a day,but if you become ill,you will only earn $100 a day.There is a 25% chance you will get the flu.If your utility function is equal to where W is equal to wealth,then what is your expected utility of catching the flu?

Question

It is flu season.When you are healthy,you will earn $144 a day,but if you become ill,you will only earn $100 a day.There is a 25% chance you will get the flu.If your utility function is equal to  where W is equal to wealth,then what is your expected utility of catching the flu?

Quizplus · Accepted Answer

We need to find the expected utility.Therefore,we use the following formula: Prob(well)U(wealth when well)+ Prob(ill)U(wealth when ill)= (.75)(12)+ (.25)(10)= 11.5.

It Is Flu Season