Cardinal Utility Analysis/Approach

In: Business and Management

Submitted By nyenati25106
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Cardinal Utility Analysis/Approach:
Definition and Explanation:
Human wants are unlimited and they are of different intensity. The means at the disposal of a man are not only scarce but they have alternative uses. As a result of scarcity of recourses, the consumer cannot satisfy all his wants. He has to choose as to which want is to be satisfied first and which afterward if the recourses permit. The consumer is confronted in making a choice.
For example, a man is thirsty. He goes to the market and satisfy his thirst by purchasing coca cola instead of tea. We are here to examine the economic forces which make him purchase a particular commodity. The answer is simple. The consumer buys a commodity because it gives him satisfaction. In technical term, a consumer purchases a commodity because it has utility for him. We now examine the tools which are used in the analyzes of consumer behavior.
Concept of Utility:
Jevon (1835 -1882) was the first economist who introduces the concept of utility in economics. According to him:
"Utility is the basis on which the demand of a individual for a commodity depends upon".
Utility is defined as:
"The power of a commodity or service to satisfy human want".
Utility is thus the satisfaction which is derived by the consumer by consuming the goods.
For example, cloth has a utility for us because we can wear it. Pen has a utility who can write with it. The utility is subjective in nature. It differs from person to person. The utility of a bottle of wine is zero for a person who is non drinker while it has a very high utility for a drinker.
Here it may be noted that the term ‘utility’ may not be confused with pleasure or unfulness which a commodity gives to an individual. Utility is a subjective satisfaction which consumer gets from consuming any good or service.
For example, poison is injurious to health but it gives…...

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