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Which of the following best explain why the pain of losing $1,000 exceeds the pleasure of winning $1,000 for risk-averse people? Check all that apply.
a) Risk-averse people are relatively poor and cannot afford to lose any money.
b) The more wealth that risk-averse people have, the less satisfaction they receive from an additional dollar.
c) Risk-averse people overestimate the probability of losing money.
d) The more wealth that risk-averse people have, the more satisfaction they receive from an additional dollar.

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Answer: b) The more wealth that risk-averse people have, the less satisfaction they receive from an additional dollar.

Explanation:

Risk Averse people in Economics are those who prefer a CERTAIN income over a GAMBLE even if the gamble might give them more money.

They are known to have a diminishing marginal utility meaning that they derive less pleasure from gaining an additional dollar, the more wealth they have.

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