Answer:
The concept of cardinal utility is a limitation of the law of substitution in economics because it assumes that utility (satisfaction or happiness) can be measured in absolute, numerical terms. The law of substitution, which is a fundamental principle in economics, suggests that consumers can replace one good with another as long as the marginal utility (additional satisfaction) per unit of money spent is the same for both goods.
The limitation arises because cardinal utility implies that utility can be assigned specific numerical values, allowing for precise comparison of preferences and satisfaction across individuals. This assumption is problematic because utility is inherently subjective and cannot be measured in such precise numerical terms. Utility is a psychological concept, and different people may derive different levels of satisfaction from the same amount of a good.
The alternative to cardinal utility is ordinal utility, which focuses on the relative ranking of preferences (e.g., saying that one good is preferred to another) rather than assigning precise numerical values to utility. The law of substitution works with ordinal utility by comparing preferences and making decisions based on rankings rather than absolute utility values.
In summary, the concept of cardinal utility is a limitation because it assumes quantifiable utility, which doesn't align with the subjective and ordinal nature of utility in economic theory.