1. Suppose there is a continent with 5 countries that have very similar systems of government and economics. Imagine you are a citizen of one of them, in which there is a presidential contest between candidates John and George. Two economists, both of whom are highly regarded and whose forecasts are believed to be equally reliable, studied the candidates' preferred economic policies. Then, the economists made projections about the rate of inflation in your country if the policies proposed by John or those proposed by George were implemented. They also projected the expected rate if inflation in the other 4 countries on the continent (which would be the same whether John or George is elected).

A.Economists' Projection of Inflation Rates

`. Other 4 Nations If John was elected If George was elected

Economist 1 4 16 4

Economist 2 6 14 26

(i)What effect does showing the projection for the other 4 countries have on the decision?

(ii)Using the graph of the value function of a typical voter, explain whether a typical voter will choose John or George in this election. Is the typical voter behaving in a risk-averse way or a risk-seeking way when making this choice? Explain.