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Question 5.Act.12: Draw a graph plotting the utility of wealth against wealth f...

Draw a graph plotting the utility of wealth against wealth for an individual who is risk seeking, and explain the shape of the graph line.

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The graph for a risk-seeking individual will be as shown in Figure 5.8. We can see from the graph that the curve is upwards-sloping. The satisfaction, or happiness, gained from an increase in wealth would be greater than the satisfaction, or happiness, lost from a decrease in wealth of an equivalent amount. This means the individual will be prepared to take on risks in order to obtain additional wealth.

5.A.12

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