Cardinal & Ordinal Approach in Economics

Cardinal utility analysis

Human wants are unlimited and they are of different strength. The means at the disposal of a man are not only scarce but they have alternative uses. As a result of scarcity of resources, the consumer cannot satisfy all his wants. He has to choose as to which want is to be satisfied first and which afterward if the resources permit. The consumer is confronted in making a choice. For example, a man’ is thirsty. He goes to the market and satisfies his thirst by purchasing coca’-cola instead of tea.

We are here to examine the economic forces which. Make him purchase a particular commodity. The answer is simple. The consumer buys a commodity because it gives him satisfaction. In technical term, a consumer purchases a commodity because it has utility” for him. We now examine the tools which are used in the analysis of. Consumer behavior.

Concept of utility

Jevons (1835-1882) was the first economist who introduced the concept of utility in economics. According to him ‘utility’ is the basis on which the demand of an individual for a commodity depends ‘Utility’ is defined as the power of a commodity or service to satisfy human want. Utility thus is the satisfaction which is derived by the consumer by consuming the goods. For example, cloth has a utility for us because we can wear it. Pen has a utility for a person who can write with it. The utility is subjective in nature. It differs from person to person. The utility of a bottle of wine is zero for a person who is non-drinker while it has a very high utility for a drinker.

Here it may be noted that the term ‘utility’ may not be confused with pleasure or awfulness which a commodity gives to an individual. Utility is a subjective satisfaction which consumer gets from .consuming any good or service. For example,Poison is injurious to health but it gives subjective satisfaction to a person who wishes to die. We can say that utility is value neutral.

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