Cardinal Utility Approach:
According to this approach, the utility is measurable and can be expressed in
quantitative terms. Cardinal utility approach is also known as classical
approach because it was presented by classical economists.
Concepts of Utility:
Following are important concepts of utility:
The characteristics of a commodity or service is to satisfy a human want.
The amount of satisfaction a person derives from some commodity or service, is
The amount of satisfaction a person derives from some commodity or service
over a period of time, is called utility. In other words, it is the sum of
marginal utilities obtained from consumption of each successive unit of a
commodity or service. If continuous units of a commodity 'X' are consumed, then
TUx = ∑ MUx
The extra amount of satisfaction to be obtained from having an additional
increment of a commodity or service. In brief, the change in total utility
resulting from one unit change in the consumption of a commodity or service per
unit of time is called marginal utility. The following formula may be used to
Marginal utility = Change in total utility / Change in
MU = ∆TU / ∆Q
MU = d TU / d Q
The amount of satisfaction to be obtained from the consumption of very first
unit of a commodity or service is called the initial utility e.g. the amount of
satisfaction to be obtained from consumption of the first apple is units. It is
called initial utility of the consumer.
When a consumer consumes successive units of a commodity or service, its
marginal utility decreases. The utility obtained from the consumption of all the
units of a commodity or service before reaching the marginal utility equal to
zero, is called positive utility.
By the consumption of that unit of a commodity where the marginal utility drops
down to zero, is called the saturation point.
By using the next unit of a commodity after saturation point, that unit gives
negative satisfaction to the consumer and marginal utility becomes negative, it
is known as negative utility.\
Although utility cannot be measured but in cardinal approach of consumer
behavior, the term which is used as a unit of utility is known as util and
arithmetic numbers (1, 2, 3, .......) are used. For example X ate an apple and
got 10 util of utility.