It is given by Dupit, Gossen, Walras, Menger and Jevons. Later Marshal and Pigou further elaborated it. According to them utility can be measured in cardinal or definite numbers like 1, 2, 3, 4,…… Cardinal numbers are those numbers which can be added and subtracted. Fisher uses the term Utils to measure the utility. Example: We can say that we get 10 utils from a cup of tea.

 Utility is Subjective  Utility is Relative  Utility is not Essentially Useful  Utility in independent of morality Assumption of cardinal Analysis:  Rational Consumer  Cardinal Utility  Independent Utility  Marginal Utility of Money is Constant  Divisibility  Diminishing Marginal Utility  Total utility Depends on Quantity of Individual Commodities. U= f(n 1, n 2,………………..n n )

There are three concepts: 1. Initial utility: The utility derived from first unit of commodity is called initial utility. 2. Marginal Utility: Marginal utility means the addition made in total utility. It can be measured as: MUn = TUn - TUn-1 or MU = Marginal utility can be of three typed (i) Positive (ii) zero (iii) negative. 3. Total Utility: The utility derived by a person from the total number of units of a commodity consumed by him is called total utility. TUn = U1+U2+U3+………….Un or TUn = ∑MUn ▲TU ▲Q

1. When MU is +ve, TU increases 2. When MU is 0, TU is maximum 3. When MU –ve, TU decreases Unit of a good Consumed Marginal Utility Total utility I66 II410 III212 IV012 V-210 VI-46 Y TU -ve Marginal utility Zero +ve MU Utility Quantity X Y O

There are two laws: 1. Law of Diminishing Marginal Utility 2. Law of Equi Marginal Utility

It was first given by ‘Gosen’. So it is called Gossen’s first law. Later this is given by Marshal in his book ‘Principal of Economics’ Meaning : According to this law, Marginal utility of a good diminishes as an individual consumes more amd more of a good. Definition: Gossen’ “The magnitude of one and the same satisfaction,when we consume to enjoy it without interruption, continually decreases until satiation is reached.

 While the total wants of a man are virtually unlimited, each singal want is satiable. There for as individual consume more and more units of a good intensity of his want for good goes on falling.  Different goods are not perfectly substitutes for each other in the satisfaction of various particular wants.

 Rational Consumer  Cardinal Utility  Independent Utility  Marginal Utility of Money is Constant  Divisibility  Diminishing Marginal Utility  Total utility Depends on Quantity of Individual Commodities. U= f(n 1, n 2,………………..n n )

QuantityMarginal utility Y O X Quantity MU Utility

 Commodities are not perfectly Substitute  Satisfaction of Particular wants  We give top priority to the most important use.

 Initial Unit  Rare and curious things  Drunkard  Misers  Good Books, poems, music

 Measurement of utility is not possible  Marginal utility of money does not remains constant  Utility is not independent  Unrealistic assumption of constant income, taste, fashion  Rate of declining Marginal Utility is not clear  Inter-personal comparisons of utility are not possible.

 Bases of the laws of consumption  Importance for the consumer  Variety in production  The law helps in price determination  Explanation of paradox of value  Bases of progressive taxation