Difference between cardinal and ordinal utility in economics ~ Economics Learning

Difference Between Cardinal and Ordinal Utility (With Examples)

Utility refers to the degree of satisfaction or pleasure that a consumer derives from consuming goods and services. Since satisfaction is psychological in nature and cannot be observed directly, economists developed different approaches to analyze it indirectly.

In economics, two main approaches are used to measure consumer behaviour utility:

Cardinal Utility – Utility can be measured numerically
Ordinal Utility – Utility cannot be measured numerically, but preferences can be ranked

Learn the difference between cardinal and ordinal utility in economics with definitions, examples, comparison table, and why ordinal utility is more realistic in consumer behavior analysis.

Understanding the difference between cardinal and ordinal utility is essential for students studying microeconomics and consumer behavior.

What Is Utility in Economics?

Utility refers to the satisfaction or benefit a consumer derives from consuming a product or service. Economists use utility as a tool to understand consumer choices and market demand.

Because satisfaction differs from person to person and cannot be measured directly, theoretical models are used to explain marginal utility consumer behavior.

What Is Cardinal Utility?

Cardinal utility assumes that satisfaction can be measured quantitatively in numerical terms. According to this approach, consumers can express satisfaction using hypothetical units called utils.

This approach was developed and popularized by Dr. Alfred Marshall and other classical economists.

Definition of Cardinal Utility

Cardinal utility is a quantitative measure of satisfaction in which utility derived from consumption can be expressed in numerical units (utils).

Key Features of Cardinal Utility

Utility is measurable in numerical units (utils)
Comparison of magnitude of satisfaction is possible
Mathematical operations like addition and subtraction can be applied
Based on the Law of Diminishing Marginal Utility
Assumes utility can be measured objectively

Example of Cardinal Utility

If a consumer gains 100 utils from an iPhone and 60 utils from a smartwatch, the iPhone provides 40 utils more satisfaction.

What Is Ordinal Utility?

Ordinal utility states that satisfaction cannot be measured numerically. Instead, consumers can rank their preferences based on satisfaction.

This approach was developed by Hicks, Allen, and Pareto and forms the foundation of modern consumer theory.

Definition of Ordinal Utility

Ordinal utility is a qualitative approach in which consumers rank goods according to preference without assigning numerical values.

Key Features of Ordinal Utility

Preferences are expressed through ranking
No numerical measurement of satisfaction
Uses indifference curve analysis
Utility is measured subjectively
More realistic than cardinal utility

Example of Ordinal Utility

A consumer prefers coffee over tea and tea over juice, but we do not know how much more coffee is preferred than tea.

Difference Between Cardinal and Ordinal Utility

Basis	Cardinal Utility	Ordinal Utility
Nature	Quantitative	Qualitative
Measurement	Measured in numbers (utils)	Cannot be measured numerically
Preference	Measures degree of satisfaction	Ranks preferences
Mathematical Operations	Possible	Not possible
Main Tool	Marginal Utility Analysis	Indifference Curve Analysis
Economists	Alfred Marshall	Hicks, Allen, Pareto
Realism	Less realistic	More realistic

Why Ordinal Utility Is More Realistic

Ordinal utility is considered more realistic because satisfaction is psychological and cannot be measured in exact numbers. Consumers naturally rank their preferences rather than calculating imaginary units of satisfaction.

For example, consumers say:

"I prefer Product A over Product B"
Not "I get 20 utils more from Product A"

Conclusion

Both cardinal and ordinal utility are important concepts in economics. Cardinal utility attempts to measure satisfaction numerically but is largely theoretical. Ordinal utility focuses on ranking preferences and is more practical and realistic.

Understanding the difference between these two approaches helps students, economists, and policymakers analyze consumer behavior and market demand more effectively.

Ordinal Utility	Cardinal Utility
Consumer derived satisfaction after consumption of products evaluation done without using number.	Consumer derived satisfaction after consumption of products evaluated in numerical numbers
Ordinal utility used qualitative approach during analysis of degree of satisfaction.	Cardinal utility used quantitative approach during analysis of degree of satisfaction.
Consumer in ordinal utility rank of preference according to their derived satisfaction after consumption of products.	Consumer in cardinal utility makes measurements of degree of satisfaction derived after consuming products in utils.
Indifference curve analysis used for explanation ordinal utility.	Marginal utility analysis used for explanation of cardinal utility.
Ordinal utility measurements promoted by modern economist	Cardinal utility measurement promoted by traditional economist.
Ordinal utility measurements results considered as more realistic.	Cardinal utility measurement results considered not realistic in comparison with ordinal utility.

What is Cardinal Utility?

This type of approach was deep study by group of economists leds by Professor Alfred Marshall. This approach propounded that Consumers satisfaction from the consumption of any goods can be measured in terms of utility.

Study of consumer behavior approach cardinal utility states that degree of satisfaction consumers derived after consumption of goods or services and can be measured degree of satisfaction in number.

Satisfying power of the commodity is known as utility and can be measured in terms of cardinal numbers (1,2,3,4,.......n). Cardinal Approach can measured or expressed in Utils. According to above economists they said that utility can be measured in terms of amount of money or monetary units.

For example if a Honda company gives 5000 units, a TVS company would gives 8000 units. This is important for welfare economic which tries to put values on consumption. Allocating efficiency is said to occur when

Marginal cost = Marginal utility

Theory of the utility cardinal and ordinal approach in hindi

Ordinal दृष्टिकोण कार्डिनल दृष्टिकोण से इस तरह से पूरी तरह से अलग है कि यह गहरा है कि उपयोगिता को मापा नहीं जा सकता है, लेकिन केवल व्यक्त किया जा सकता है। इसका मतलब है कि यहां उपभोक्ता को जो करना है| उसे विभिन्न वस्तुओं से प्राप्त संतुष्टि के आधार पर विभिन्न वस्तुओं में से चुनाव करने में सक्षम होना चाहिए।

इस प्रकार का दृष्टिकोण प्रोफेसर अल्फ्रेड मार्शल के नेतृत्व में अर्थशास्त्रियों के समूह द्वारा गहन अध्ययन था। इस दृष्टिकोण ने प्रतिपादित किया कि किसी भी वस्तु के उपभोग से उपभोक्ताओं की संतुष्टि को मापा जा सकता है|

What is Ordinal utility

This approach is totally different from cardinal approach in the way that it profound that utility can't be measured, but can be only expressed. It means that here what consumer needs to do is to find out his preferences in case of two or more good or commodities. He should able to make choices from different commodities on the basis of satisfaction he achieved from different commodities.
Ordinal Approach was given by economist like Hicks, Pareto, Allen, etc.

Why ordinal utility is more realistic

Ordinal utility used by consumers for measuring consumption of goods and services using qualitative characteristics. Ordinal utility is more realistic and not measured in numerical number.

Ordinal utility is more realistic based on satisfaction level of consumer derived from consumption of goods and services.

Ordinal utility is more realistic because consumer can really feel itself after consumption of goods and services. Ordinal utility is more realistic considered to consumers, due to ordinal utility based on qualitative characteristics derived after consumption of goods and services.

Ordinal utility is considered more than cardinal utility because ordinal utility measured qualitative satisfaction level after consumption of goods by consumers. Where as cardinal utility measured satisfaction level of consumers after consumption of goods in quantitative based. Cardinal utility utility based on marginal utility concept for measuring satisfaction level.

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Difference between cardinal and ordinal utility in economics