Re: ISI interview

Posted by shiva on Jun 23, 2017; 5:54am
URL: http://discussion-forum.276.s1.nabble.com/ISI-interview-tp7606011p7606156.html

Answer is u(x,0)>u(y,0)>u(x',0), solve this you will get the inequality.

And alpha =1 it is risk neutrality , the preferences will be anywhere along the budget line

When alpha < 1 it is risk averse with convex preferences, optimal bundle will be only at  one particular point on budget line.


I was able to solve the question whereas economic intuition I was not able to explain during interview. I expect most of the economic students will be able to get this intuition, as of I saw at least half of them were able to solve this question