Saturday, August 4, 2018

Some basic utility concepts to be known

Utility: It is usually used for the description of the degree of satisfaction. We can understand it as the commodity power to satisfy the customer needs.
For example, Imagine a hungry person buys a biscuit packet expecting that the biscuit packet will fill his stomach. This means that the biscuit packet has a utility.
Utility is divided into two types for better understanding.
They are as follows:- 1. Cardinal utility. 2. Ordinal utility.

Cardinal Utility: It is a utility in which the utility is measured through cardinal approach i.e, the satisfaction derived by the customer by buying the good can be expressed numerically. It is a quantitative concept.
It has a psychological unit called Util. It is not taken as a standard unit because it will vary from place to place and time to time. It is less realistic.

Ordinal Utility: It is a utility im which the utility can clearly be expressed in terms of rank i.e, the satisfaction derived by the customer by buying the good cannot be expressed numerically. It is a qualitative concept.
It is measured in ranks. It is more realistic. 

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