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:
- Cardinal utility approach 2. Ordinal utility approach
Cardinal utility approach
- 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.
- Given by: Alfred Marshall, Jevons and Manger.
- 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
- 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.
- Given by: K.Hicks and Allen
- 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.