The marginal utility of income for a risk-averse individual will be:
A)constant.
B)diminishing.
C)increasing.
D)unknown;the answer depends on the value of income.

Question

Quizplus · Accepted Answer

The marginal utility of income for a risk-averse individual will be diminishing because as income increases, the individual will experience a decreasing marginal utility of each additional unit of income. This is because as income increases, the individual becomes more financially secure and the marginal benefit of additional income decreases. Moreover, a risk-averse individual is likely to prefer a certain income over uncertain income, which would further decrease the marginal utility of additional income.

The Marginal Utility of Income for a Risk-Averse Individual Will