Question

In cardinal utility analysis A. it is recognized that numbers can not be assigned to utility. B. the concept of marginal utility exists while in ordinal utility analysis marginal utility does not exist. C. numbers can be assigned to utility. D. marginal utility always increases as more of a good is consumed.

Answer 1

Answer: In cardinal utility analysis, numbers can be assigned to utility.

Step-by-step explanation:

Cardinal Utility is the utility that describes that an economic welfare can be observed directly and be given a value. One way to put value on goods is to see the price paid for the good. The utility derived from each commodity is measurable and the most convenient way of measuring utility is money that is, utility is measured by the amount of money that a consumer is willing to pay for units of a commodity.

For example, if we are ready to pay £7,000 for a second-hand Toyota Car, we can infer that we must get 7,000 utils. In other words, there is a relationship between the value of cardinal utility and the price one is willing to pay. The idea of cardinal utility is vital to rational choice theory as it allows consumers make optimal choices in order to maximise their utility.

Answer 2

The correct answer is letter "C": numbers can be assigned to utility.

Step-by-step explanation:

Cardinal utility is a form of measuring utility in economics assigning a numeric value to utility. Under such a scenario the unit of value is the "util". For instance, a new mobile device is 600 utils while a new laptop is 1,000 utils. The problem with cardinal utility relies on the lack of a scale from where to measure similar objects.