Question : According to the cardinal theory of consumer's equilibrium, utility is measured in:
Option 1: Marginal units
Option 2: Monetary terms
Option 3: Ordinal units
Option 4: Cardinal units
Correct Answer: Cardinal units
Solution : The correct answer is (d) Cardinal units.
The cardinal theory of consumer's equilibrium assumes that utility can be measured and quantified numerically. It suggests that consumers can assign cardinal (numerical) values to the satisfaction or utility they derive from consuming goods and services. This allows for the comparison of utility across different goods and the determination of consumer equilibrium based on maximizing total utility or marginal utility.
In contrast, the ordinal theory of consumer's equilibrium (opposite to cardinal theory) only considers the ranking or ordering of preferences without assigning specific numerical values to utility.
Question : In the cardinal utility approach, consumer's equilibrium is achieved when:
Option 1: Total utility is maximized.
Option 2: Marginal utility is maximized.
Option 3: Marginal utility equals zero.
Option 4: Marginal utility per dollar spent is equal across all goods.
Question : In the cardinal utility approach, the consumer's equilibrium is achieved when:
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