Cardinal vs Ordinal Utility: Measuring Satisfaction
Can satisfaction be measured in numbers? Marshall said Yes, Hicks said No.
head-to-Head Comparison
| Basis | Cardinal Utility | Ordinal Utility |
|---|---|---|
| Propounded by | Alfred Marshall | Hicks & Allen |
| Measurement | Quantifiable (Utils) | Rankable (1st, 2nd, 3rd) |
| Assumption | Marginal Utility of Money is Constant | Rationality & Transitivity |
| Analysis Tool | Law of Diminishing MU | Indifference Curves |
The 'Utility' Trap
Cardinal utility relates to 'Utils' (Example: Pizza gives 50 utils). Ordinal utility relates to 'Preference' (Example: I prefer Pizza over Burger). Modern economics largely follows the Ordinal approach (Indifference Curves).
Common Ground (Similarities)
- Both assume the consumer is rational.
- Both aim to explain consumer equilibrium.
Test Your Understanding
Q1: Indifference Curve analysis is based on:
Cardinal Utility
Ordinal Utility ✅
Marginal Utility
None
Explanation: IC analysis ranks combinations of goods, which is the Ordinal approach.