Economic theory is often concerned with utility functions that measure the satisfaction (utility) economic agents derive from participating in the market. A “risk-taker” is one who gains such utility from economic gambles, whether they are found at the gaming tables in casinos or involved with perilous business ventures that may or may not pay off.

Paula Peril is such an adventurer, for whom the higher the risk, the greater the thrill. The data in the accompanying table reflects the Wager in thousands of euros, and the Utility is measured in units of satisfaction called “utils.”

Encode the data in your selected computer software and graph the relationship. What do you find? Does there appear to be a positive association? Selecting Utility as a function of the size of the Wager, estimate the linear model. Comment on its results. Form a double-log model and discuss the results including the elasticity measure that the model reports. Graph the double-log model. Compare the linear nature of the two graphs.