Customers are the ultimate user of any goods or services and the producer’s only aim is to satisfy their needs and desires. However, the level of satisfaction differs from individual to individual and their mental position. The measurement of this utility and satisfaction has always been a topic of discussion.
Many theories describe the level of satisfaction. However, cardinal utility and ordinal utility are the two predominant theories of utility. The cardinal utility believes in measuring the satisfaction level in utils and the ordinal utility believes that the satisfaction level cannot be evaluated; however, it can be levelled.
This article is a ready reckoner for all the students who want to learn the difference between cardinal utility and ordinal utility.
|It explains that the satisfaction level after consuming any goods or services can be scaled in terms of countable numbers.||It explains that the satisfaction level after consuming any goods or services cannot be scaled in numbers. However, these things can be arranged in the order of preference.|
|Pizza gives Sam 60 utils of satisfaction, whereas burger gives him only 40 utils.||Sam gets more satisfaction from a pizza as compared to that of a burger.|
|Utility is measured based on utils.||Utility is ranked based on satisfaction.|
|It is less practical.||It is more practical and sensible.|
|This theory was applied by Prof. Marshall
||This theory was applied by Prof. J R Hicks
|Utility Analysis||Indifference Curve Analysis|
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Frequently Asked Questions on Cardinal and Ordinal Utility
What is the concept of ordinal utility?
The concept of ordinal utility states that the level of satisfaction a consumer obtains after consuming various commodities cannot be measured in numbers but can be arranged in the order of preference.
What is mean by cardinal utility?
The cardinal utility states that the level of satisfaction a consumer acquires after consuming any goods and services can be measurable and expressed in quantitative numbers.
What are the limitations of cardinal utility?
The theory is applied to a single commodity where the utility of a single commodity is treated independently of the other commodities.
What are the two approaches to measure utility?
The two approaches to measure utility are a) Ordinal Utility b) Cardinal Utility