A person that is risk a verse will have indifference curves in a state space graph that are
A)linear
B)convex to the origin
C)concave to the origin
D)L - shaped

Question

Quizplus · Accepted Answer

Indifference curves for a risk averse person are typically concave to the origin because as the person gains more wealth, the marginal utility of each additional unit of wealth decreases. This means the person becomes less willing to take on additional risk to gain more wealth. Convexity would indicate that the person is willing to take on more risk as they become wealthier, which is not typical of a risk averse person. Linear or L-shaped indifference curves would also not accurately represent the behavior of a risk averse person.

A Person That Is Risk a Verse Will Have Indifference