Assuming that there are competitive state-contingent income claim markets for the only two states, illustrate the individual’s choice of state-contingent income claims. What is the effect of increases...

Assuming that there are competitive state-contingent income claim markets for the only two states, illustrate the individual’s choice of state-contingent income claims. What is the effect of increases in (a) p1 and (b) his endowment in state 1. (c) Why is it impossible for an expected utility maximizer to have a positively sloped demand curve for income in any state? (Hint: her preferences are additively separable in yis.)