Q.Explain the assumptions of the Cardinal Utility Approach and examine its main limitations.

Both major laws of this chapter rest on the cardinal approach to utility, which itself has been questioned by later economists.

The Cardinal Utility Approach, associated with Alfred Marshall, is the foundation on which both the Law of Diminishing Marginal Utility and the Law of Equi-Marginal Utility are built.

Assumptions. (i) Measurability — utility can be expressed in exact numerical units called utils, just as weight is measured in kilograms. (ii) Additivity — the utilities derived from different goods can be added together to obtain a combined measure of total satisfaction. (iii) Constant marginal utility of money — the utility of an additional rupee to the consumer is assumed to stay the same even as money is spent, which lets money serve as a stable yardstick for measuring the utility of other goods. (iv) Rationality — the consumer is assumed to behave rationally, consistently aiming to maximise total utility. (v) Independence of utilities — the utility from one good is assumed to be unaffected by the quantity of other goods consumed, so goods can be analysed one at a time.

Limitations/criticisms. (i) In reality, utility cannot be measured in exact numbers — satisfaction is a subjective, psychological experience with no physical measuring instrument analogous to a thermometer, so the "util" is a convenient simplification rather than something genuinely observable. (ii) The assumption that the marginal utility of money stays constant is itself unrealistic, since a person's own valuation of an additional rupee logically should change as their income or spending changes — yet the whole cardinal framework depends on this assumption to use money as a fixed measuring rod. (iii) Utilities from different goods are rarely fully independent in real consumption — the satisfaction from tea, for example, depends partly on whether sugar and milk are also available, contradicting assumption (v). (iv) The cardinal approach studies each good largely in isolation and does not cleanly separate the income effect and the substitution effect of a price change, a separation that the later, more advanced analysis achieves more precisely. …

Students often list the assumptions correctly but answer the 'limitations' part only vaguely (e.g., 'utility can't really be measured') without connecting each specific criticism back to the specif …