Risk Aversion Flashcards
1
Q
Risk Averse
A
Decreasing marginal utility with respect to income
2
Q
Risk Loving
A
Increasing marginal utility with each additional income
3
Q
Risk Neutral
A
- Marginal utility is constant
- Each additional dollar is equivalent
4
Q
For risk neutral…
A
Utility of a gamble=utility of gaining something with certainty
5
Q
Risk averse graph looks like
A
Curved, downward line starting at the horizontal axis
6
Q
Risk loving graph looks like
A
Upward sloping line starting at vertical axis
7
Q
Risk neutral graph looks like
A
Diagonal, upward sloping line starting at vertical axis
