ECO200Y1 Lecture : February 2nd notes

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2 Feb 2011
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ECO200Y1 Full Course Notes
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ECO200Y1 Full Course Notes
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example: bringing an umbrella with you when you go out: bring: if it rains today you"ll be happy you brought it. If it doesn"t rain then you"ll be unhappy that you brought it when you didn"t need it: don"t bring it: if it rains, you"ll be unhappy that you didn"t bring an umbrella. If it doesn"t rain, then you"ll either be indifferent or somewhat happy. People tend to be risk averse: refuse to gamble with com modities. However lotto tickets reflect a risk seeking behaviour since it is an unfair low stake gamble in which many people who are supposedly risk adverse seem to undertake. Example: consider the lottery/ gamble which pays y with probability p and y with probability p = 1- p. This can also be seen as speculation. www. notesolution. com. This however is not dependent upon the seller"s probability but rather that of the buyer.

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