Question

The principal limitation of utility analysis relates to the basic assumption that utility can be expressed in terms of __________.

• A. cardinal numbers
• B. ordinal numbers
• C. both (a) and (b)
• D. none of these

Answer 1

The correct option is A cardinal numbers

In cardinal utility analysis, utility can be measured in terms of cardinal numbers i.e. 1,2,3,4, etc. However, utility is a psychological concept and it is difficult to measure utility or satisfaction in cardinal numbers. Utility can be used to rank consumer's preferences rather easily. Thus, it is the principal limitation of cardinal utility theory.