At early levels of income, each additional rise in income produces a sharp rise in financial satisfaction, but at high levels of income, each additional rise in income produces a very small rise in financial satisfaction. This is known as:
A) a quadratic equation
B) diminishing returns
C) a squared term
D) rich people's malaise

Question

Quizplus · Accepted Answer

Diminishing returns occur when the additional input produces a smaller output. In case of income, the additional rise in income at early levels produces a sharp rise in financial satisfaction (output), but as the income level increases, each additional rise in income produces a very small rise in financial satisfaction (smaller output). This is because people's basic needs are already met at high levels of income, and they need more than just money to increase their satisfaction.

At Early Levels of Income, Each Additional Rise in Income