Customers are the ultimate user for any goods or services, and the producers only aim is to satisfy their needs and desires. However, the level of satisfaction differs from an individual to individual and their mental position. The measurement of this utility and satisfaction has always been a topic of discussion.
There are many theories that describe the level of satisfaction; however, cardinal utility and ordinal utility are the two predominant theories of utility. Cardinal utility believes in measuring the satisfaction level in utils, and 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.
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Cardinal Utility | Ordinal Utility |
Definition | |
| It explains that the satisfaction level after consuming a good or service can be scaled in terms of countable numbers. | It explains that the satisfaction after consuming a good or service cannot be scaled in numbers, however, these things can be arranged in the order of preference. |
Example | |
| Sam submits pizza gives him 60 utils of satisfaction whereas burger gives only 40 utils. | Sam submit, he gets more satisfaction from Pizzas as compare to the burger. |
Measurement | |
| Utility is measured on the basis of utils | Utility is ranked on the basis of satisfaction |
Realistic | |
| It is less practical. | It is more practical and sensible. |
Used By | |
| This theory was applied by Prof. Marshall
| This theory was applied by Prof. J R Hicks
|
Other Name | |
| 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 ordinal utility concept states that the satisfaction a consumer obtains after consuming various commodity cannot be measured in numbers, but can be arranged in order of preference.
What is mean by Cardinal utility?
The Cardinal Utility states that the 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 basically applied to a single commodity where utility of a single commodity is treated independent of the other commodities.
What Two Approaches Measure Utility?
The two approaches of measuring utility are: a) Ordinal Utility b) Cardinal Utility.
