Are You Happy With the Money You Have?
Posted on | November 20, 2008 | 4 Comments
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The question that is posed today is “are you happy with the money you have?” The law of diminishing marginal utility states that while a person increases the consumption of a product while keeping consumption of all other products constant there is a decline in marginal utility that person derives from consuming each additional unit of that product. In more words or less, the law states that the more one has of something, the less they enjoy it. For example, if you make $100,000 a year, you gain less utility from each dollar than a person who makes $10,000 a year. Once enough money is earned, one cannot spend it all therefore they gain almost no utility out of their excess money earned.
The graph of diminishing margainal utility is increasing and concave down as shown in the image. This reiterates that one throughly gains satisfaction from a product as they start to gain more access to it. Over time, as the product becomes easily gained, the satisfaction decreases. This is true of any product of luxury. The more vacations to Hawaii one goes on, the less satisfaction they will receive. We have all felt this this concept as the first time we get a large paycheck or go on an exotic vacation it is almost surreal, but as time goes by it becomes common.
Once again, the question that is posed is “are you happy with the money you have?“ Where are you on the law of diminishing marginal utility graph? Are you still gaining great utility from your income or have you earned enough where every dollar you receive no longer means as much? As a young adult, I am still on the left hand side of the curve and greatly uptrending as I have only been a professional for two years. As time goes by, ever dollar I earn will mean less and less to me as shown.
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4 Responses to “Are You Happy With the Money You Have?”
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November 20th, 2008 @ 1:31 pm
I am still at the stage where every dollar earned is extremely welcomed. But that stage you mentioned where each additional dollar earned feels meaningless, sounds wonderful!
November 21st, 2008 @ 7:01 am
I agree, counting down the days until the money I earn means MUCH less.
November 21st, 2008 @ 3:14 pm
Hmm.. I don’t think I’ll ever think that way about money, but one can only hope.
November 22nd, 2008 @ 5:14 pm
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