Assumptions of cardinal utility approach are the following:
(i) Rationality : It is believed that the consumer has a rational sense that he satisfies his wants according to his satisfaction. This means that he buys first a commodity which yields the highest utility and he buys last a commodity which gives the least utility.
(ii) Limited Money Income : Consumers have limited money in order to spend on goods and services, which they have chosen to continue using.
(iii) Maximisation of Satisfaction : Every rational consumer intends to maximize his satisfaction from his given money income.
(iv) Utility is Cardinally Measurable : The cardinalists assume that utility is cardinally measurable, i.e. it can be measured in absolute terms and in cardinal numbers.
(v) Diminishing Marginal Utility : The cardinalists assume that the utility gained from successive units of a commodity consumed decreases as a consumer consumes more and more units of it.
(vi) Constant Utility of Money : The marginal utility of money remains constant whatever the level of consumer’s income and each unit of money has utility equal to 1.
(vii) Utility is Additive : Cardinalists maintain that utility is not only cardinally measurable but also it is additive. The additivity of utility can be expressed through a utility function.