Cardinals Utility approach & Ordinals approach or indifference curve analysis approach.
Cardinals Utility approach & Ordinals approach or indifference curve analysis approach.
Cardinal Utility
By Cardinal Utility, we mean the power of a commodity to satisfy a human wants is called utility or it is the satisfaction that a person gets from consumption of good and services.
According to Marshall, Pigou and Neo-Classical economist that Utility is measurable, just as a height of a tree, a person can be measured. So the utility derived from the consumption of a commodity can be measured in quantitative term say 1,2,3,10,15,20 etc. cardinal means to express in number.
Ordinal Utility
The concept of consumer equilibrium can also be explained with the help of ordinal utility or indifference curve approach. The I.C analyses approach was first introduced by Pareto & later on it was developed by J.R Hicks and R.G.D Allen. These economists are of the view that it is wrong to base the theory of consumption on two assumptions.
i. That there is only one commodity which a person will buy at one time and
ii. The utility can be measured.
Their point of view is that utility is purely subjective and is immeasurable. Moreover, an individual is interested in a combination of related goods and not in the purchase of one at one time. So they base the theory of consumption on the scale of preference and the ordinal measurement of utility. According to these economists, a consumer simply ranks or orders his preference.
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Naeem Javid Muhammad Hassani is working as Conservator of Forests in Balochistan Forest & Wildlife Department (BFWD). He is the CEO of Tech Urdu (techurdu.net) Forestrypedia (forestrypedia.com), All Pak Notifications (allpaknotifications.com), Essayspedia, etc & their YouTube Channels). He is an Environmentalist, Blogger, YouTuber, Developer & Vlogger.