Please when answering the question reference the chart such as points L, E, W on the chart.

1) Referring to the following chart, describe the notion of diminishing marginal utility and why individuals with diminishing marginal utility of wealth behave as risk averse. Concepts Risk Aversion Risk averse individuals will require a premium to take on risk, i.e. the expected yield on an investment exceeds the risk-free return. Diminishing marginal utility of wealth E(U) CE - Certainty Equivalent Wealth CE = Expected Payoff in Utils mapped back to S's. (Max $'s you would pay) LE W CE 1) Referring to the following chart, describe the notion of diminishing marginal utility and why individuals with diminishing marginal utility of wealth behave as risk averse. Concepts Risk Aversion Risk averse individuals will require a premium to take on risk, i.e. the expected yield on an investment exceeds the risk-free return. Diminishing marginal utility of wealth E(U) CE - Certainty Equivalent Wealth CE = Expected Payoff in Utils mapped back to S's. (Max $'s you would pay) LE W CE