UTILITY AND ORDINAL UTILITY

UTILITY AND ORDINAL UTILITY:-

• The satisfaction derived by the consumer after consumption of a product or taking a service is known as utility in economics.
• Utility of every individual is based on their tastes & preferences.
• The actions will be taken by an individual within the boundary of rationality.
• This is basically measured with two processes:-

1. Cardinal utility
2. Ordinal utility

Ordinal utility:-

It is measured in ranks unlike that of cardinal utility which shows the interpretation in a quantified manner.

Ordinal utility is described with the help of indifference curves.

For instance:-

I have to measure the satisfaction level of consumer as a inter at a firm, where i had to see the preferences of a consumer while choosing Choco cream in relation to two companies (i.e., HERSHEY'S & NUTELLA) where it was observed that people prefer NUTELLA more than HERSHEY'S because of taste and prices.

This type of deductions based on preferences of customer are shown by cardinal utility methods.