Hello I need more information for the problem: Assume that Jay discovers, to his

Question

Hello

I need more information for the problem:

Assume that Jay discovers, to his dismay, that his 2014 healthy-state income will be lower than his 2013 healthy-state income, but that his sick-state income. I unchanged from 2013 to 2014. Assume that his healthy-state income in 2013 is I, and his healthy-state income in 2014 is

IH - . Assume 0 <p < 1.

a) What is the difference between Jay’s expected income in 2014, E[I14], and his expected income in 2013, E[I13]?

the solution is The difference between Jays expected income in 2014 and his expected income in 2013 is healthy state income is unchanged because the income is not changed when compared to two years .

My questions is why E[I] 2014 and 2013 healthy state unchange why the income is not change when compared two years. please let me if the solution is correct and explain why.

thank you

Explanation / Answer

The reason for healthy state income be unchanged was

the individual is risk aversion

utility - income model, where individual see the certain outcome with uncertain outcome but from the same expected income that means they will check out the return comparison but from same income.

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