Utility is a psychological phenomenon; it implies the satisfying power of a good or service. It differs from person to person, as it depends on the mental attitude of a person. The misurabilit dell'utilit always a matter of contention. The two main theories for the utility are the cardinal utility and ordinal utility. Many traditional economists believe that utility is measured quantitatively, such as length, height, weight, temperature, etc. This concept known as the concept of cardinal utility .
On the other hand, the concept of ordinal utility It expresses the utility of a commodity in terms of "less than" or "more than". Read the article to learn important differences between cardinal and ordinal utility.
|Sense||The cardinal utility is the utility in which the satisfaction derived by consumers from the consumption of goods or services can be expressed numerically.||Ordinary utility states that the saturation that a consumer derives from the consumption of goods or services cannot be expressed in numerical units.|
|Analysis||Marginal utility analysis||Analysis of indifference curves|
|Promoted by||Classical and neoclassical economists||Modern economists|
Definition of Cardinal Utility
The notion of cardinal utility was formulated by neoclassical economists, who believe that utility is measurable and can be expressed quantitatively or cardially, for example 1, 2, 3 and so on. Traditional economists developed the theory of consumption based on the cardinal measurement of utility, for which they coined the term " util "which expands into Utility units. A util is assumed to be equal to one unit of money, and there is the constant utility of money.
Furthermore, it has been realized with the passage of time that the cardinal measurement of utility is not possible, therefore less realistic. There are many difficulties in measuring utility numerically, since consumer-derived utility from a good or service depends on a number of factors such as mood, interest, taste, preferences and more.
Definition of ordinary utility
The ordinary utility proposed by modern economists, JR Hicks, and RGD Allen, which states that it is not possible for consumers to express the satisfaction deriving from a commodity in absolute or numerical terms. Modern economists believe that utility is a psychological phenomenon, it cannot be measured quantitatively, theoretically and conceptually. However, a person can express introspectively whether a good or service provides greater, lesser or equal satisfaction than another.
In this way, the ordinal dell'utilit measurement, ie qualitative, based on the classification of preferences for goods. For example : Suppose a person prefers t to coffee and coffee with milk. Then, he or she can say subjectively, his preferences, ie t> coffee> milk.
Key differences between the cardinal and ordinal utility
The following points are worthy of note regarding the difference between cardinal utility and ordinal:
- The cardinal utility is the utility in which consumer satisfaction with the consumption of goods or services can be measured numerically. The ordinary utility states that the satisfaction that a consumer derives from the consumption of a product or service cannot be measured numerically.
- Cardinal utility measures utility objectively, while there is a subjective measurement of ordinal utility.
- The less realistic cardinal utility, since the quantitative measurement of the utility is not possible. On the other hand, ordinal utility is more realistic as it is based on qualitative measurements.
- This utility is based on Cardinal dell'utilit marginal. On the contrary, the concept of ordinal utility is based on the analysis of indifference curves.
- The cardinal utility measured in terms of utility, or unit of utility. On the contrary, ordinal utility measured in terms of classification of the preferences of a commodity with respect to each other.
- of cardinal utility approach proposed by Alfred Marshall and his followers. Conversely, the ordinal utility approach was launched by Hicks and Allen.
These two approaches to the analysis of the demand mentioned above are not in competition with each other, but during the analysis of consumer behavior, represent two levels of sophistication. Both the ordinary utility is that item are critical to evaluate and analyze consumer demand for a good or service, whatever the purpose.