CHAPTER • Consumer Behavior 97 EX AMPLE MARGINAL UTILITY AND HAPPINESS In Example 3.2 (page 81), we saw that money (i.e., a higher income) can buy happiness, at least to a degree But what, if anything, does research on consumer satisfaction tell us about the relationship between happiness and the concepts of utility and marginal utility? Interestingly, that research is consistent with a pattern of diminishing marginal utility of income, both in the U.S and across countries To see why, let’s re-examine Figure 3.9 (page 82) in Example 3.2 The data suggest that as incomes increase from one country to the next, satisfaction, happiness, or utility (we are using the three words interchangeably) all increase as per-capita income increases The incremental increase in satisfaction, however, declines as income increases If one is willing to accept that the satisfaction index resulting from the survey is a cardinal index, then the results are consistent with a diminishing marginal utility of income The results for the U.S are qualitatively very similar to those for the 67 countries that make up the data for Figure 3.9 Figure 3.21 calculates the mean level of life satisfaction for nine separate income groups in the population; the lowest has a mean income of $6,250, the next a mean income of $16,250, and so on until the highest group, whose mean income is $87,500 The solid curve is the one that best fits the data Once again, we can see that reported happiness increases with income, but at a diminishing rate For those students concerned about future income prospects, a recent survey by psychologist Daniel Kahneman and economist Angus Deaton shows that 8.2 Satisfaction with Life 7.8 7.6 7.4 7.2 6.8 10000 20000 30000 40000 50000 60000 70000 80000 90000 100000 Income in 1999 U.S $ F IGURE 3.21 MARGINAL UTILITY AND HAPPINESS A comparison of mean levels of satisfaction with life across income classes in the United States shows that happiness increases with income, but at a diminishing rate