BASIC ASSUMPTIONS OF MARGINAL UTILITY ANALYSIS

We shall first mention a few basic assumptions on which the marginal utility analysis is based. We shall see later how the marginal utility analysis has been criticised on the ground that the assumptions on which it is hashed arc unrealistic or invalid. TIle following arc the main assumptions.

(i) Cardinal Measurement of Utility

Marginal utility analysis assumes in the first place that utility can be measured and the exact measurement can be given by assigning definite numbers such as I.  2, 3, etc. Thai is, it is assumed that utility is a quantifiable entity. This mcaus that a person can express the satisfaction derived from the consumption of a commodity in quantitative terms. He can say. for instance, that for him the first unit of the commodity has utility equal to 10. the second unit 8. and so on. In the way. it i,  possible for a consumer to compare the utilities of different goods. If. for cx.unplc. fruit has for him utility 20 and sweets 10. then he can say. that for him the outlet of fruits is double that of sweets. Utility is usually measured in ignored and it is assumed to remain constant throughout.