00:01
Let us look into the equation, here we are given u of x equal to x square.
00:06
In general, we can take which is equal to x power alpha, where x square means alpha equal to 2.
00:13
Suppose, if alpha is less than 0, then we can conclude that risk averse individual, if alpha equal to 1, then risk neutral, if alpha greater than 1, then risk seeking individual.
00:42
So, from the given details, we can say the two person is sorry, the person is risk seeking individual because alpha is greater than 1.
00:58
The second one, l1 represents the probability of lose and l2 equal which is equal to 0 .1 and l2 equal to 0 .9.
01:10
Therefore, from this we can gain equal to 0 dollars and p of x equal to 0 .1.
01:17
So, the person is risk seeking because alpha is greater than 2, hence he would risk for l2 and lose 10 ,000 dollars...