TYPES OF UTILITY APPROACH

Last time I have discussed about the concept and nature of utility. Today I will discuss about the Types OF UTILITY APPROACH.

Utility approach is basically of 2 following types:

  1. Cardinal utility approach 2. Ordinal utility approach

Cardinal utility approach

  1. Meaning: according to this approach, utility can be measured or quantified / expressed numerically. “util” is the measurement unit of utility. It can be added or subtracted.
  2. Given by: Alfred Marshall, Jevons and Manger.
  3. According to them: whatever a consumer is willing to sacrifice for a commodity rather than going without it, is the utility of that commodity. According to Marshall “Money is the measuring rod of utility”.

          Ordinal utility approach

  1. Meaning: according to this approach, utility derived from a commodity cannot be expressed numerically. It is a feeling of the consumer which cannot be thinked. It cannot be added or subtracted.
  2. Given by: K.Hicks and Allen
  3. According to them: on the basis of satisfaction derived we can compare the level of satisfaction but cannot comment on the difference between the level of satisfaction. Example we can say that a good is better than B good but we cannot say how much difference is between A and B.

This is all about types of utility.

 

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