what are the four basic limitations of utility analysis?
Limitations of Utility Analysis are:
1. The assumption that utility can be measured cardinally (or numerically) is not true as utility is a subjective concept and varies from person to person and from time to time.
2. Utility analysis assumes that marginal utility of money is constant. This assumption is unrealistic.
3. There is no verification of law of diminishing marginal utility.
4. The utility analysis ignores the substitution and income effects.
1. The assumption that utility can be measured cardinally (or numerically) is not true as utility is a subjective concept and varies from person to person and from time to time.
2. Utility analysis assumes that marginal utility of money is constant. This assumption is unrealistic.
3. There is no verification of law of diminishing marginal utility.
4. The utility analysis ignores the substitution and income effects.