Chapter 12 Uncertainty.

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Presentation transcript:

Chapter 12 Uncertainty

Utilities and probabilities. Expected utility functions, or von Neumann-Morgenstern utility functions. They are indifferent up to any positive affine transformation. (affine transformation: y = a + bx).

Risk aversion and risk loving. U U $ $ Concave vs convex utility. The second derivatives.

Chapter 14 Consumer’s surplus

消费者得益 r1 r2 总收益 r3 p r4 r5 r6 1 2 3 4 5 6 Consumers’ Surplus p246

Producer’s surplus p255 P Producer’s surplus P* Supply curve Q* Q

Change in producer’s surplus Supply curve R T P’ Q’’ Q Q’

The water-diamond paradox Pd Pw Q

Calculating gains and losses B T Change in consumers’ surplus