Cardinal Utility Approach Assumptions

The Cardinal utility approach makes several key assumptions about consumer behavior to analyze how consumers make choices to maximize their satisfaction.

Core Assumptions

Based on the theory, the valid assumptions related to the Cardinal utility approach are:

• (i) Consumer is rational: Consumers are assumed to have stable preferences and aim to maximize their total utility.
• (iii) Utility cardinally measurable: Utility, representing satisfaction, can be measured quantitatively using specific units (like 'utils').
• (v) Diminishing marginal utility of commodities: As a consumer consumes more units of a specific commodity, the additional satisfaction (marginal utility) derived from each extra unit decreases. This is also known as the Law of Diminishing Marginal Utility.
• (vi) Maximization of satisfaction: The primary goal of a rational consumer is to achieve the highest possible level of satisfaction or utility given their income and prices.

Assumptions Not Part of the Core Theory

The following points are generally not considered core assumptions of the basic Cardinal utility model:

• (ii) No limit on money income: This contradicts the concept of a budget constraint, which is essential for analyzing consumer choice under scarcity.
• (iv) Diminishing marginal utility of money: While sometimes discussed, the standard Cardinal approach often assumes a *constant* marginal utility of money for simplicity in calculations involving multiple goods.
• (vii) For calculating total utility, individual utilities of commodities are to be multiplied: Total utility is calculated by *summing* the marginal utilities of different units consumed, not multiplying them.

Therefore, the correct set of assumptions is (i), (iii), (v), and (vi).