Prof. Nuwal was late again. SOP for this class is to start late. Apparently he’s going to have an evaluator sitting in on this class soon.Cardinal and Ordinal utility. Cardinal utility is quantfiable utility. Utility in terms of monetary values. Ordinal utility is relative utility, utility of various alternatives ranked in comparison to each other.
Marginal, in this context, means extra or last. Marginal is the difference between two totals found by adding one more. Marginal Utility is the utility of the last unit of a good/service consumed, or the utility of one additional unit. In general, marginal utility of goods goes down as more of the good is consumed. This is known as diminishing marginal utility.
Equi-Marginal Utility, also referred to as the Maximising rule, states that a consumer with a fixed monetary income who spends all his income on commodities will spend his income in such a way as to get maximum marginal utility, no matter how he chooses to spend that income. In other words, a rational consumer will not willingly spend money on an commodity if an alternative commodity exists which would have greater marginal utility. Because of this, each commodity a person spends income on will have equal marginal utility for its final unit.
Consumer Surplus is what a consumer is willing to pay for a commodity, as compared to what he actually pays for that commodity. The difference between willingness to pay and actual payment.