The principle of diminishing sensitivity holds that
A) The marginal impact of enlarging a change from the status quo declines with the size of the change
B) The marginal impact of enlarging a change from the status quo increases with the size of the change
C) The total impact of enlarging a change from the status quo declines with the size of the change
D) The total impact of enlarging a change from the status quo increases with the size of the change

Question

Quizplus · Accepted Answer

The principle of diminishing sensitivity means that the impact of increasing a change from the status quo becomes less significant as the size of the change increases. In other words, individuals become less sensitive to larger changes as they get used to smaller changes. Therefore, the marginal impact of enlarging a change from the status quo declines with the size of the change, as stated in option A.

The Principle of Diminishing Sensitivity Holds That