Elements of Numerical Mathematical Economics with Excel

6.2. Consumer optimization and derivation of the demand curve in the cardinal approach

The cardinal utility approach, to set the theory of the consumer equilibrium, postulates the so-called law of diminishing marginal utility which states that as the rate of consumption increases, the marginal utility derived from consuming additional units of a good will decline as well. This principle is directly derived from the Gossen's first law, which always implies U ′ ′ ( x ) = d 2 U d x 2 < 0. Using the Alfred Marshall's Principles of Economics words, it is stated as “the additional benefit which a person derives from a given ...