In the utility function of a risk-averse individual, the utility is always increasing although at a decreasing rate.Identify the feature of this utility function.
A)Diminishing ordinal utility
B)Diminishing expected utility
C)Diminishing normative utility
D)Diminishing marginal utility
E)Diminishing cardinal utility

Question

Quizplus · Accepted Answer

Diminishing marginal utility is the correct feature because it describes a situation where, as consumption increases, the additional satisfaction (utility) gained from consuming one more unit decreases. This is consistent with the description of a risk-averse individual's utility function increasing at a decreasing rate.

In the Utility Function of a Risk-Averse Individual, the Utility