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Unit 5: Consumer Behaviour: Cardinal Approach

How many of each CD would you buy? Suppose the price of a Lester Young CD rises to Notes
$10. How many of each CD would you buy? Use this to show how the principle of rational
choice leads to the law of demand.
3. Discuss the law of diminishing marginal utility with the help of an illustrate schedule and
a corresponding graph.
4. Which of the following examples best shows the Law of Diminishing Marginal Utility and
why?
(a) Raina is happier after buying her fifth pair of shoes than she was after only four

pairs.
(b) A reasonably fat Motumal gets sick after eating too many Burgers.

(c) Ramnaresh loves cheeseburgers but finds that the third burger did less to increase
his happiness than the second burger did.

5. Give at least five examples to show how the law of diminishing marginal utility relates to
everyday life?
6. Discuss with example the law of marginal utility.
7. Assign a measure of utility to the study you are putting into your various courses. Do your
study habits follow the principle of rational choice?
8. Why do you think that the law of Equi-marginal utility holds under perfectly competitive
market.
9. Compare and contrast cardinal and ordinal utility.

10. Explain how consumer’s equilibrium is reached using cardinal approach.

Answers: Self Assessment

1. False 2. True
3. True 4. True
5. True 6. zero

7. total utility 8. money
9. Utils 10. Commodity

5.9 Further Readings

Books Dr. Atmanand, Managerial Economics, Excel Books

Jeffrey M. Perloff, Microeconomics, Pearson Education
Robert S. Pindyck, Microeconomics, Pearson Education
Sampat Mukherjee, Microeconomics, Prentice Hall

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