Question: Part D ( 4 marks ) : Explain the concept of diminishing marginal utility in the context of insurance. Put differently, what is the effect

Part D

(4

marks

)

: Explain the concept of diminishing marginal utility in the context of insurance. Put differently, what is the effect of diminishing marginal utility on the reservation price?Part E

(3

marks

)

: In words, explain how the reservation price changes with wealth for someone whose preferences exhibit increasing marginal utility.

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