On any day, the rich tend to be a bit happier than the poor, but increases in average living standards don’t seem to make people happier. The average American’s income is up about 80% since 1972, but the percentage describing themselves as “very happy” (roughly a third) hasn’t changed. As living standards increase, most of us respond by raising our own standards: Things that once seemed luxuries now are necessities and we work harder to buy stuff that satisfies us less and less.
a. How do widespread increases in living standards influence total utility?
b. How do total utility and marginal utility from consumption changes over time?