Axiom- statement that is accepted as true without further proof or argument
1. Rationality:- the consumer is rational and aims at maximizing his utility subject to the constraint imposed by his income level.
2. Cardinal utility:- utility of each commodity is measurable conveniently in monetary units by the amount of money the consumer is willing to pay for extra unit of commodity.
3. Constant marginal utility of money:- this assumption is necessary if the monetary unit is used as the measure of utility. The essential features of a standard unit of measurement are that it be constant. If marginal utility of money changes as income increases (or decreases) the measuring- rod for utility becomes inappropriate for measurement.
4. Diminishing marginal utility:- this means that utility gained from larger/additional quantities of a commodity declines.
Wilfykil answered the question on March 6, 2019 at 09:09
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