Correct option is B
The Correct Answer Is:(b) In numbers
Explanation:
In cardinal utility analysis, utility is expressed numerically to measure the satisfaction a consumer derives from consuming a good or service. The cardinal approach, developed by Alfred Marshall, assumes that utility is quantifiable and can be measured in utils (imaginary units of measurement).
For example, if a person consumes an apple and gains 10 utils of satisfaction, and from a banana 5 utils, it implies that the apple provides twice the satisfaction of the banana.
Information Booster:
- Definition: Cardinal utility refers to the measurable satisfaction a consumer derives from a good, using numerical values.
- Assumptions of Cardinal Utility Analysis:
- Utility is measurable and expressed in numbers.
- Marginal utility is diminishing, meaning additional consumption provides less satisfaction.
- Rational consumer behavior, where consumers aim to maximize total utility.
- Constant utility of money, meaning the value of money remains stable in consumption decisions.
- Formula for Total Utility (TU):TU=∑MUTU = \sum MU TU=∑MUwhere MU is the marginal utility derived from each additional unit.
- Marginal Utility (MU): The additional satisfaction gained from consuming one more unit of a good.
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