choice under uncertainty, expected value, expected utility: Introduction

How does uncertainty affect consumer’s decision-making? In the presence of uncertainty we have what is called- probability of occurrence of an event. For example, if probability that a consumer’s income will increase is 90 per cent, then there is 10 per cent chance that his income might stay the same. If there is complete information about the probability of occurrence of an event, we can construct what is called a probability distribution. A probability distribution shows the likelihood that a given random variable will take up any of the given values
expected value is nothing but the mean or the weighted average of a random variable X.Symbolically, Expected Value (EV) = summationXiPi where Xi is the random variable value at i and Pi is the associated probability.also summation Pi=1
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