The relationship between money and its utility follows Fechner's Law. Accordingly, as the amount of money increases in constant amounts, then the utility of money
A) increases in smaller and smaller amounts.
B) increases in constant amounts.
C) remains constant.
D) decreases in smaller and smaller amounts.

Question

Quizplus · Accepted Answer

Fechner's Law states that the subjective sensation of a stimulus increases logarithmically as the intensity of the stimulus increases. When it comes to money, this means that as the amount of money increases in constant amounts, the marginal utility of each additional unit of money decreases. In other words, each additional dollar or unit of currency provides less and less satisfaction or utility. Therefore, the correct choice is A, as the increase in utility of money decreases in smaller and smaller amounts.

The Relationship Between Money and Its Utility Follows Fechner's Law