A qualitative idea such as utility can be difficult to measure, but economists try to quantify the concept in two different ways: cardina✱l utility and ordinal utility. Both are﷽ imperfect, but each can provide an important foundation for studying consumer choice.

Cardinal vs. Marginal Utility

In economics, utility simply means the satisfaction that a consumer experiences from a product or service. While the concept is considered an important factor in decision-making and product choice, it presents a problem for economists trying to incorporate the concept to 澳洲幸运5官方开奖结果体彩网:microeconomics models because utility varies among consumers for the same product, and it can be influenced by other factors, such as price and the aꦡvailability of alternatives.

Cardinal utility is an attempt to quantify and abstract concept because it assigns a numericไal value to utility. Models that incorporate cardinal utility use the theoretical unit of utility, the util, in the same way that any other measurable quantity is used. For example, a baske🐻t of bananas might give a consumer a utility of 10, while a basket of mangoes might give a utility of 20.

The downside to cardinal utility is that there is no fixed scale to work from. The idea of 10 utils is meaningless in and of itself, and the factors that influence the number might vary widely from one consumer to the next. If another consumer gives bananas a util value of 15, it doesn't necessarily mean that the individual likes bananas 50% than the first consumer. The implication is that there is no way to compare utility between consumers.

One important concept related to cardinal utility is the 澳洲幸运5官方开奖结果体彩网:law of diminishinཧg marginal utility, which states that at a certain point, every extra unit of a good provides less and less utility. While a consumer might assign the first basket of bananas a value of 10 utils, after several baskets, the additional utility of each new basket might decline significantly. The values that are assigned to each additional basket can be used to find the point at which utility is maximized or to estimate a customer's 澳洲幸运5官方开奖结果体彩网:demand curve.

Special Considerations

An alternative way to measure utility is the concept of 澳洲幸运5官方开奖结果体彩网:ordinal utility, which uses rankings instead of values. The benefit of using rankingsℱ is that the subjective differences between products and between consumers are eliminated, and all that remains are the ranked preferences. One consumer might like mangoes more than bananas, and another might prefer bananas over mangoes. These are comparable, if subjective prefer🔜ences.

Lastly, utility is used in the development of 澳洲幸运5官方开奖结果体彩网:indifference curves, which represent the combination of two products that a consumer values equally and independently of price. For example, a consumer might be equally happy with three ba👍nanas and one mango or one banana and two mangoes. As a result, three bananas plus one mango and one banana plus two mangoes represent two points on the consumer's indifference curve.