cardinal and marginal demand

1. SEMINAR
Managerial Economics
SUB:
Cardinal utility and Marginal utility
Demand
Demand schedule
Demand curve

2. UTILITY
The concept of utility can be looked upon two angles;
Product angle
utility is the want-satisfying property of a commodity
Consumer’s angle
utility is the psychological feeling of satisfaction,
pleasure ,happiness or well-being , which a consumer derives
from the consumption, possession or the use of a commodity.

3. Cardinal Utility
The cardinal utility approach is propounded by neo-classical
economist, who believe that utility is measurable,
And the customer can express his satisfaction in cardinal
or quantitative number, such 1,2,3 and so on.
Utils
Utils meaning, the unit of utility. It is the measure developed
By the neo-classical economists. Here one utils is equillent to
one Rupee and the utility of money remain constant

4. Cardinal Utility Analysis
The concepts of belong to the field of mathematics
Cardinal utility implies that the utility can be
measured in quantitative
According the concept of cardinal utility, one can
measure utility in terms of unit

5. TOTAL UTILITY
Total utility is the sum of the utility which a consumer
derives from the consumption of the different unit
of a good
The total utility that the consumer derives from the
consumption of S unit of good X is
Ux=U1+U2+U3+...........+Us

6. LIMITATION OF CARDINAL UTILITY
APPROACH
Assumed that the utility is cardinal , in reality it is subjective
Utility assumed to be additive
One can not add different types of utility or satisfaction from
different goods
The utility derived from the consumption of a good was assumed
to be independent of the utility from the consumption of
another good
The marginal utility of money was assumed to be constant ,
this is not true.
The utility theory does not analyse the effect of a change in the
price in terms of the income effect and the substitution.

7. ORDINAL UTILITY
 An ordinal no unit of measurement , is ranking only
 Higher number imply only more preferred
 In the ordinal utility context maximising utility means choosing
that bundle of good that is on the highest indifference curve
achievable with given income and price

8. DEMAND
Relationship between price and quantity
Definition;
law of demand states the people will buy more at lower price
and buy less at higher price, other things remain same
-Prof. Samuelson
Features;
Inverse relationship
Price independent and demand variable
Income effect and substitution effects

9. DEMAND SCHEDULE AND
DEMAND CURVE
The demand schedule is a table that shows the relationship
between the price of the good and quantity demanded
The demand curve is a graph of the relationship between
the price of a good and the quantity demanded
Centeris paribus: “other things remains same”

10. DEMAND SCHEDULE
PRICE QUANTITY
DEMANDED
0 12
.5 10
1 8
1.5 6
2 4
2.5 2
3 0

11. DEMAND CURVE
Quantity
Price
3
2.5
2
1.5
1
.5
0 2 4 6 8 10 12

12. Presented by
AKHIL LAL P