Explain the difference between cardinal utility and ordinal utility. Give example
Solution:
Cardinal Utility |
Ordinal Utility |
Definition |
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It explains that the satisfaction level after consuming any goods or services can be scaled in terms of countable numbers. | It explains that the satisfaction level after consuming any goods or services cannot be scaled in numbers. However, these things can be arranged in the order of preference. |
Example |
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Pizza gives Sam 60 utils of satisfaction, whereas burger gives him only 40 utils. | Sam gets more satisfaction from a pizza as compared to that of a burger. |
Measurement |
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Utility is measured based on utils. | Utility is ranked based on satisfaction. |
Realistic |
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It is less practical. | It is more practical and sensible. |