Problem 5 There are three kinds of individuals in a community: a low risk type (L) whose probability of getting disabled

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Problem 5
There are three kinds of individuals in a community: a low risk
type (L) whose probability of getting disabled is 5%, a medium risk
type (M) whose probability of getting disabled is 10% and a high
risk type whose probability of getting disabled is 60%. If they are
not disabled, they can earn an income of 500/ and in the case they
are disabled they will have an income of just 10/-
All individuals are risk averse and have a utility function
given by ,
where is the
income.
ANSWER THIS QUESTION BRIEFLY INCLUDE ALL THE NECESSARY
INFORMATION AND STEPS REQUIRED THIS IS A 15 MARKS QUESTION IT IS A
BIT URGENT.