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Chpter 2
Chpter 2
Chpter 2
Consumer The one who takes decisions about what to buy for the satisfaction of
wants, both as an individual or as a member of a household, is called a consumer.
3.Cardinal Measurement of Utility It is that concept of utility which advocates that utility
can be measured in terms of units like 2, 4, 6, 8, etc.
5.Total Utility (TU) It is the sum total of Marginal Utilities derived from the consumption
of all the units of a commodity.
TU = MUX + MU2+….+MU„ or sum of MU
8.Law of Diminishing Marginal Utility The law states that as more and more standard
units of a commodity are continuously consumed, Marginal Utility derived from each
successive units goes on diminishing. It is also called fundamental law of satisfaction
10.Law of Equi-marginal Utility The law states that in order to maximise their
satisfaction a consumer must spend his money on two goods in such a manner that the
ratio of Marginal Utility of a commodity to its price becomes equal to the ratio of
Marginal Utility of other commodity to its price
Explain the Law of Diminishing Marginal Utility with the help of a utility schedule.
(Delhi 2013)
or
Explain the Law of Diminishing Marginal Utility with the help of a Total Utility
schedule. (All India 2011; Delhi 2010)
Ans. It is the fundamental Law of Utility approach to consumer’s equilibrium. This law
states that as more and more standard units of a commodity are continuously consumed,
the Marginal Utility obtained from each successive unit goes on diminishing.
The above schedule shows that with the consumption of successive unit of a commodity,
the level of satisfaction falls and becomes negative or in other words, MU tends to decline
as consumption of the commodity increases.
Explain the difference between cardinal utility and ordinal utility. Give example. (All
India 2012)
Ans. Difference between cardinal utility and ordinal utility
Expert Shiksha Shobhit Mishra
8130071900
pg. 2
UNITS CONSUMED TOTAL UTILITY (TU) MARGINAL UTILITY (MU)
1 30 30
2 56 26
3 76 20
4 88 12
5 90 2
6 90 0
7 86 -4
8 78 -8