This document discusses two theories of consumer behavior: the cardinal approach and the ordinal approach. The cardinal approach assumes that utility can be objectively measured in "utils" and examines total utility (TU) and marginal utility (MU). Total utility is the total satisfaction from consuming a good, while marginal utility is the additional satisfaction from consuming an additional unit of that good. The document provides a formula for calculating marginal utility and an example table showing TU and MU values.

1. Cardinal and Ordinal Utility
A Theory of Consumer Behaviour
Dr. Dhiresh Kulshrestha
Associate Professor (Economics)

2. Theories of Consumer Behaviour
• There are two theories that seek to explain consumer behavior.
• The Cardinal Approach : Which explains utility is objectively
measurable.
• The Ordinal Approach : Which explains consumer can rank their
preferences.

3. The Cardinal Approach (Utility theory)
• The utility theory explains consumer behavior in relation to the
satisfaction that a consumer gets the moment he consumes a good.
• When we speak of utility, we refer to the satisfaction or benefits that a
consumer derives of his consumption.

4. 2
• This theory assumes that satisfaction can be measured.
The unit of measures of utility is called utils.

5. Total Utility(TU)
and
Marginal Utility (MU)
• Total Utility (TU) : It is the total amount of satisfaction or pleasure a
person derives from consuming some specific.
TU = TU1 + TU2 + TU3 + TU4 + TU5 +…..TUN

6. Marginal Utility (MU)
• It is the extra satisfaction a consumer realizes from an additional unit
of that product.
• In other words, it is an additional satisfaction that an individual derives
from consuming an additional unit of a good or services

7. 2
Formula:
MU = Change in total unit / change in quantity
MU = TUN- TUN-1/ QN- QN-1

8. For example (TU and MU)
(Table 1) MU = TUN- TUN-1/ QN- QN-1

9. Analysis of Table 1

10. Total Utility (TU)
(As per Table 1)

11. Marginal Utility (MU)
(As per Table 1)