1 explain the conditions of consumer equilibrium with the help of marginal utility analysis?
rn2 explain cardinal and ordinal approach or concepts of utility with examples?
Ans 1) Consumer equilibrium using Marginal utility (in one good case and two-good case) has been extensively covered in our study material. You can find the answer to your question at the below mentioned link.
Ans 2)
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Basis of Difference |
Cardinal Utility |
Ordinal Utility |
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Valuation of satisfaction |
According to the cardinal utility, the satisfaction derived from the consumption of a particular good and service can be measured in absolute numbers. |
According to the ordinal utility, the satisfaction derived from the consumption of a particular good and service cannot be measured in absolute numbers. |
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Measurement of satisfaction |
Cardinal utility measures satisfaction in terms of utils. |
Ordinal utility measures satisfaction in terms of ranks. |
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Measuring order |
Under cardinal utility, the consumption of goods and services providing higher satisfaction are accorded higher utils. |
Under ordinal utility, the consumption of goods and services providing higher satisfaction are accorded higher ranks. That is the consumption providing highest satisfaction is accorded first rank. |
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Example |
For example, utility derived from the consumption of a glass of milk is 3 utils. |
For example, a glass of milk is ranked 1st while a glass of soda is ranked 2nd. |