Cardinal utility Concept Video Lecture | SSC CGL Tier 2 - Study Material, Online Tests, Previous Year

in this video we will discuss about
Cardinal utility theory this theory was
given by Alfred Marshall
now the word Cardinal means something
that can be measured in numerical terms
that is something that can be measured
in numbers so with this we can say that
Cardinal utility is an attempt to
measure consumer satisfaction in the
numerical terms but with this a question
that arises is that utility is a
psychological thing
I mean amount of satisfaction depends on
your way of thinking so how could
someone measure it in numbers and if it
is measurable then in what terms what is
the unit of measurement to wanter answer
is to answer this question all I have to
say is that this method is backed by
some assumptions and these assumptions
are first is that utility is
quantifiable and is measured in utils
but by being quantifiable it means that
we can express in it in quantities
numbers so utils is that rod the unit of
measurement in which we measure those
quantities those numbers but this util
is just an imaginary unit of measurement
which is used to calculate the amount of
satisfaction of a person it is used to
measure utility under this approach the
second
assumption under this theory is that
consumer is rational which means that he
always maximizes his utility he knows
how much amount of satisfaction he is
getting from consuming each unit of the
good the third assumption is that
utility is additive
this means that total utility is derived
by summing the amount of utility a
person gets from consuming individual
units of goods like if a person is
consuming some oranges so the total
utility he'd get from consuming certain
amount of oranges is this some of the
utilities that he's getting from eating
each unit of orange like utility from
first orange plus from the second third
and so on the fourth assumption under
this approach is that marginal utility
of money remains the same we will
discuss about marginal utility in some
another video but for now all I would
say that marginal utility of money is
the utility of the last unit of the
money of the single unit of the money
for the consumer by this I mean that if
like in form of rupees or in dollars in
any form of currency the marginal
utility of money is the utility for the
consumer of one rupee or one dollar so
under this approach we will assume that
this utility this marginal utility of
money remain same remains constant