Question

briefly distinguish between the cardinal utility approach and ordinal utility approach to consumer behavior.explain with illustration the law of eventual diministing marginal utility?500 words

Answer 1

Cardinal and ordinal utility are theories that are used to explain the levels of satisfaction that a consumer derives from the consumption of goods and services. There are a number of differences between the methods in which either measure consumption satisfaction. While cardinal utility is a quantitative measure, ordinal utility is a qualitative measure. Using Cardinal utility a customer can assign a number to a product that when consumed was able to satisfy their needs. Using ordinal utility a customer can rank the products according to the level of satisfaction that was derived. Further to this in cardinal utility it is assumed that consumers derive satisfaction through consumption of one good at a time. However, in ordinal utility it is assumed that a consumer may derive satisfaction from the consumption of a combination of goods and services, which will then be ranked according to preference.