3. Suppose that the market for housing is perfectly competitive, i.e. there are many consumers, and that housing is a normal good. Next year half the consumers will be getting a random income shock that can take one of two 'H'ElUE'E- either negative or positive. Every consumer who will potentially receive the shock knows they will be getting a shock. Consumers who receive a positive [negative] income shock experience the same positive [negative] change in their WTP for housing. First suppose that shocks are independent and identically distributed across individuals. Note: in the following ouesticrnsl askyou to compare the level of risk. The kind of comparison I expect you to make is as follows: a distribution that pays out a with probability P and b with probability {1 1"], it is more risky than a distribution that pays out c with probabilityp and d with probability {1 P] where a 2 c E or E b a. Assume that half the consumers who will experience the shock have the same high WTP while the other half have the same low 1iiil'TF'. Who experiences more risk in their E5 from housing {i.e. dispersion}. consumers who know about the shock and have high WTP, or consumers who know about the shock and have low WTP? 1:) points b. Could consumers who do not expect a shock experience more risk than those who do":I Give an example or provide reasoning. 5 points c. Suppose that shocks are now perfectly correlated across individuals [i.e. all shocked individuals either receive the positive shock or all receive the negative shock}, could consumers who do not expect a shock experience more risk than those who do?I Give an example or provide reasoning. 10 points