Question

6. Cardinal utility approach assumes which of the following?
(a) MU of money is variable
(b) MU of money is constant
() MU of money is greater than the utility obtained from the commodity being consumed.
(d) MU of money is less than the utility obtained from the commodity being consumed.​

Answer 1

Answer:

option (b) is correct answer

Explanation:

as according to the cardinal utility approach MU of money is equal to the utility obtained from the commodity being consumed.

MU of money being constant.

Answer 2

In Microeconomics,cardinal utility theory assumes that that the marginal utility(MU) of money is constant for any rational consumer or individual.Hence,the correct answer is option (b) or MU of money is constant.

Explanation:

One of the important assumptions of cardinal utility theory is the constant MU of money or the additional utility or satisfaction that is obtained by any ration consumer or individual remains fixed or constant as the individual or consumer earns one more unit of money or wealth.According to the cardinal utility notion,if the MU of money is variable or increases or decreases with more or less units of money earned,then it will be practically difficult for the economists to measure the consumer utility or satisfaction obtained from various units of consumption.Therefore,the economists consider the consumer utility of satisfaction obtained from consumption of goods and services as variable and the only parameter to understand consumer behavior and holds the utility of money as constant or fixed.If both are variable,it will create various practical issues or problems in the measurement process.