Anonymous

What Are The Limitations Of The Equi Marginal Utility?

2 Answers

Muhammad Abdullah786 Profile
In real life it is difficult to measure utility cardinally because no consumer has any type of utilometer which could represents satisfaction in utile. Accordingly the utility can not either be added nor can it be compared physically.

The cardinal approach to consumer equilibrium suggests very careful calculation of MU and then the comparison of MU with the prices of respective goods. But in real life one hardly affords the prices distinguish of actuating MU and the prices.
Now a day the purchases are mostly made on the basis of customs, tradition and demonstration. But in the utility approach we do not find any glimpses of the above set factors in the determination of optimal choice.

In actual life a consumer also purchases, consumer durables, like television, fridge, car, house and dish-antenna etc. It is not possible to assess their life time. Consequently there MU cannot be asteriated, then how a comparison could be made between MU and prices.
Utility does not depend upon the units of commodity as the classical approach suggests. Rather in so many cases utility depends upon two goods etc. As you= F (x, Y).
Cardinal approach assumes that marginal utility of money remains constant. But in real life it is so because when prices falls Mu of money will rise.

Answer Question

Anonymous