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Write any four assumptions of cardinal approach.

Write any four assumptions of cardinal approach.

Solution

The cardinal utility approach rests on several assumptions, four important ones being:

  1. Rationality: the consumer seeks to maximise satisfaction within their budget.
  2. Cardinal measurement: utility can be measured in absolute numbers, called utils.
  3. Diminishing marginal utility: each successive unit of a good yields less added utility.
  4. Constant marginal utility of money: the marginal utility of money stays fixed, so money can serve as a measuring rod for utility.

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