The term ‘cardinal numbers’ means simple numbers like 10, 15, 20, etc. the cardinal utility therefore means utility that can be expressed in simple numbers such as 10 units, 15 units or 20 units. In this séance, utility is exactly measurable in cardinal numbers. Based on these cardinal numbers the consumer can also tell by hoe many units the utility of good Y exceeds that of good X and thus exactly how much he performs Y to X.
Ordinal utility on the other hand expresses utility of different goods in ordinal numbers. Ordinal numbers are those numbers which merely denote the sequence order or ranking in a sequence such as 1st , 2nd,3rd, etc. without going into the absolute value of an item in that sequence. Here we want to only know which good or which bundle of goods a consumer prefers to the other, and ask him to arrange goods in order of his preference. The ordinal utility or the indifference curve approach to the demand theory is based on this ordinal utility. In other words, the ordinal utility approach seeks to build up the theory of demand on the basis of the knowledge of the order of preferences of a consumer or his preference scales. We discuss the ordinal utility approach or the indifference curve analysis to explain the basis of demand.SUBMIT ASSIGNMENT NOW!