Question

Diminishing marginal utility of wealth implies that the utility function is a. upward-sloping and has decreasing slope. b. upward-sloping and has increasing slope. c. downward-sloping and has decreasing slope. d. downward-sloping and has increasing slope.

Answer 1

In this case,the answer would be option a. or upward-sloping and has decreasing slope.

Step-by-step explanation:

• Diminishing marginal utility of wealth implies that with acquisition of each monetary unit of wealth,the overall satisfaction,happiness or utility obtained by any individual increases but at a decreasing rate.
• In other words,the additional or incremental satisfaction,happiness or utility derived by any individual from obtaining one more or additional monetary unit of wealth decreases progressively.
• Such trend in the utility level of any individual obtained from wealth acquisition or accumulation basically explains the shape of the utility function of wealth in this instance.
• Due to diminishing marginal utility of wealth,its utility function will slope upward as the total utility increases until a certain point.However,as the marginal utility obtained from acquiring one more unit of wealth decreases,its slope will be decreasing progressively and at one point it will become 0 implying that the total utility of wealth is not increasing anymore.This is the point where the utility function of wealth will reach its highest or maximum level.