@partiko | Lesson 13 | Cardinal vs Ordinal Utility |

Hello everyone

We buy or consume something product because it gives utility or satisfaction to us. What is the value of utility that is obtained from certain product purchases, only the buyer knows it. therefore, satisfaction or utility depends on the amount of goods used or purchased. Utility can be interpreted as the subjetive measure for the satisfaction obtained by consumers.

There are two classes or opinions about utility namely Cardinal Utility and Ordinal Utility.

The cardinal utility holds that one's satisfaction can be measured objectively, as well as measuring altitude, measuring distance and another.

Ordinal utility holds that one's satisfaction can not be measured objectively but can only be ranked, which is more satisfying.

In the image below, shows panel a is the cardinal utility curve, where satisfaction initially increases with increasing goods consumed, but after reaching maximum satisfaction (A), the satisfaction level decreases even though the amount consumed increases (q)

Panel b shows the ordinal utility curve, where the satisfaction rate tends to increase with the increase in the amount of goods used.

Thank You

Posted using Partiko Android