QS Study

The cardinal utility approach or what is called also as the Marshallian approach to consumer’s equilibrium is based on the following assumption –

  • Rationality

It is assumed that the consumer is a rational being in the sense that he satisfies he wants in order to their merit. It means that he buys a commodity which yields the highest utility and he buys last a commodity which he gives the last

  • Limited money income

The consumer has a limited money income to spent on the goods to services he chooses to consume.

  • Maximization of satisfaction

Every rational consumer intends to maximize his satisfaction from his given money income.

  • The utility is cardinally measurable

The cardinal assumes that utility is cardinally i.e, it can be measured in absolute term a cardinal number.

The cardinal assumed that the utility gained from successive units of a commodity consumed decreases as a consume more and more units of it.

  • The constant utility of money

The marginal utility of money remains constant whatever the level of consumer’s income and each unit of money has utility equal to 1.