If an individual is risk averse, then as their income increases, their utility from that income:

Question

Quizplus · Accepted Answer

According to the concept of diminishing marginal utility, as income increases, the additional utility gained from each additional unit of income decreases, meaning that the rate of increase in utility from income increases at a decreasing rate. This is even more pronounced for a risk-averse individual, who is willing to forego some potential gain in order to avoid risk. Therefore, their utility from income will increase at a decreasing rate as their income increases.

If an Individual Is Risk Averse, Then as Their Income