Consider an individual with income w who is at risk of losing an amount of money D with probability .This individual has access to an insurance market an unit of insurance costs q and pays 1 in the event of a loss Define o as the amount of insurance that the individual buvs. The individual's roblem is to choose a. Define as the consumption in the state where there s no loss and x2 as the consumption in the state where there is a loss. Assume hat this individual has preferences under uncertaintv that can be represented n the expected utility form,such thatU=1-ux+xIn nddition,assume that the individual is strictly risk-averse,such that u<0. Write the problem of the optimal choice of insurance in a similar form to the raditional deterministic consumer problem.In other words: a What is the relative price of consumption in the two states-that is,what is the rate at which the individual can transfer consumption from one state to another? What is the marginal rate of substitution among the two goods at a given point(i,? b) Characterize graphically the solution to the individual's problem in these terms(that is,in theplane in a traditional preference and budget constraint diagram.