5 Questions
Match the following terms with their definitions according to the Cardinal Utility Theory:
Cardinal Utility = Utility is measurable and can be expressed in numbers Utils = Unit of measurement of satisfaction Rational consumer = A consumer who aims to maximize satisfaction within a limited budget Monetary units = Measure of utility by the amount of money a consumer is willing to pay for another unit of a commodity
Match the following assumptions of the Cardinal Utility Theory with their explanations:
Consumer is Rational = The consumer aims to maximize his/her satisfaction given a limited budget or income Cardinal Utility = The utility of each commodity can be measured and expressed in numbers
Match these terms with their corresponding definitions in the context of utility theory:
Utils = A subjective unit of measurement of satisfaction Cardinal Utility = The concept that utility is measurable like weight, height, and temperature
Match the following terms with their corresponding concepts in Cardinal Utility Theory:
Rational consumer = The main objective of the consumer is to maximize his/her satisfaction given his/her limited budget or income Cardinal Utility = Utility can be measured in monetary units or by subjective units called ‘utils’ Utils = Suggested unit of measurement of satisfaction
Match these terms to their definitions as per the Cardinal Utility Theory:
Cardinal Utility = Assumes that the level of utility can be expressed in numbers Rational consumer = A consumer has to be rational in order to maximize his/her satisfaction Utils = A unit of measurement of satisfaction suggested by the Cardinal Utility Theory
Study Notes
Cardinal Utility Theory
- The Cardinal Utility Theory assumes that utility can be measured and quantified-cardinally, i.e., in terms of numbers.
- The theory suggests that an individual's utility can be measured in terms of utils, which are the units of utility.
- The Cardinal Utility Theory is based on the assumption that an individual's preferences are consistent and transitive.
- The theory assumes that more is preferred to less, i.e., an individual always prefers a higher quantity of a good to a lower quantity.
- The Cardinal Utility Theory is used to explain consumer behavior, particularly in situations where the consumer has to make choices between different bundles of goods.
- The theory is based on the concept of diminishing marginal utility, which states that the additional utility derived from consuming one more unit of a good decreases as the quantity of the good consumed increases.
- The Cardinal Utility Theory is used to construct indifference curves, which show different combinations of two goods that provide the same level of satisfaction to the consumer.
Test your knowledge of Cardinal Utility theory and the measurement of satisfaction with this quiz. Explore how utility can be measured like weight, height, and temperature, and learn about the concept of 'utils'. Challenge yourself and enhance your understanding of utility and consumer satisfaction.
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