1.2. The Cardinal Utility Theory

Question 1

To get a higher level of satisfaction, the consumer must be able to _ the utility of the various baskets of goods that can be bought with the available income.

Answer 1

compare

Question 2

According to _, utility is measurable like weight, height, and temperature

Answer 2

Cardinal Utility theory

Question 3

In Cardinal Utility theory, there is a unit of measurement of satisfaction called ‘_’.

Answer 3

utils

Question 4

The Cardinal School postulated that utility can be measured in ___ or by __.

Answer 4

monetary units (i.e., by the amount of money that the consumer is willing to pay for another unit of a commodity) or by subjective units called ‘utils’.

Question 5

T/F
The Ordinal School assumes that the level of utility can be expressed in numbers.

Answer 5

False

Question 6

Assumptions of Cardinal Utility Theory:

Answer 6

I . The consumer is Rational
II . Cardinal Utility
III . Constant Marginal Utility of money
IV . Diminishing Marginal Utility
V . The total utility of a basket of goods depends on the quantities of the individual commodities.

Question 7

_: The main objective of the consumer is to maximize his/her satisfaction given his/her limited budget or income.

Answer 7

The consumer is Rational

Question 8

In order to maximize his/her satisfaction, the consumer has to be _.

Answer 8

rational

Question 9

Measurement of Utility are _ and _.

Answer 9

Total and Marginal Utility

Question 10

_ refers to the total amount of satisfaction a consumer gets from consuming or possessing some specific quantities of a commodity (X) at a particular time.

Answer 10

Total Utility

Question 11

As the consumer consumes more of a good (X) per time period, his/her total utility _.

Answer 11

increases

Question 12

T/F
There is a saturation point for the commodity in total utility after which the consumer will be capable of enjoying greater satisfaction from it.

Answer 12

False

Question 13

_ refers to the total utility derived from consuming n units of a commodity X.

Answer 13

TU

Question 14

_ refers to the additional utility obtained from consuming an additional unit of a commodity.

Answer 14

Marginal Utility

Question 15

_ is the change in total utility resulting from the consumption of one more unit of a product per unit of time.

Answer 15

Marginal utility

Question 16

Mathematically, the formula for marginal utility is:

Answer 16

MU = /\ TU
_______
^
/\ Q

Question 17

At the saturation point of total utility, marginal utility becomes _.

Answer 17

zero

Question 18

When TU increase, MU _

Answer 18

decrease

Question 19

When TU declines, MU is _

Answer 19

negative

Question 20

After this maximum point of total utility,
if the consumer consumes more quantity of banana, their total utility decreases, which leads to _`.

Answer 20

dissatisfaction

Question 21

T/F
The utility that a consumer gets by consuming a commodity for the first time is the same as the consumption of the good for the second, third, fourth, etc.

Answer 21

False

Question 22

_ is central to the cardinal utility analysis of consumer behavior.

Answer 22

LDMU

Question 23

_ states that as the quantity consumed of a commodity increases over a unit of time, the utility derived by the consumer from the successive units goes on decreasing, provided the consumption of all other goods remains constant.

Answer 23

LDMU

Question 24

LDMU states that as the quantity consumed of a commodity increases over a unit of time, the utility
derived by the consumer from the successive units goes on decreasing, provided the consumption of all other goods remains _.

Answer 24

constant

Question 25

TU increases with an increase in consumption of banana, but at a decreasing rate. It means that MU _ with _ in consumption.

Answer 25

decreases, increase