Name-Bhavik Jain, Harshit nayak, divyansh rao

Class-11th G
School-Krishna Public School

CARDINAL UTILITY
WHAT IS MEAN BY CARDINAL UTILITY
 The cardinal utility states that the level of
satisfaction a consumer acquires after consuming
any goods and services can be measurable and
expressed in quantitative numbers.l
WHAT IS MEAN BY ORDINAL UTILITY

Ordinal utility states that the level of satisfaction a

consumer obtains after consuming various
commodities cannot be measured in numbers but
can be arranged in the order of preference.
CARDINAL UTILITY
Cardinal Utility is a utility that
determines the satisfaction of
a commodity used by an
individual and can be
supported with a numeric
value.
CARDINAL UTILITY VS ORDINAL UTILITY
ORDINAL UTILITY
 Ordinal Utility defines that
satisfaction of user goods can
be ranked in order of
preference but cannot be
evaluated numerically.
IT’S IMPORTANCE IN ECONOMICS

 Cardinal Utility provides a value of utility to

different alternatives. In other words, it enables
consumers to rank the magnitude of how much
they prefer one good over another.
 In economics, an ordinal utility function is a
function representing the preferences of an agent
on an ordinal scale. Ordinal utility theory claims
that it is only meaningful to ask which option is
better than the other
UTILITY ANALYSIS
 The characteristic of a good or service that allows
it to fulfil the needs of consumers is
comprehended as its “utility.” It is the fulfilment
—actual or anticipated—that results from the
consumption of a good or service. Utility is a
relative concept, this means that it differs from
individual to individual, from location to
location, and from period to period. A utility is its
ability to satisfy a need.
CARDINAL UTILITY (TOTAL UTILITY AND MARGINAL UTILITY)

 Total utility - Total utility refers to the total

satisfaction derived by the consumer after
consuming a certain(fixed) quantity.
 Marginal utility- Marginal Utility (MU) refers to
the extra satisfaction obtained from consuming
one more unit of the commodity.
RELATIONSHIP BETWEEN TOTAL UTILITY AND MARGINAL UTILITY

 When TU increases, the MU decreases but

remains positive (which states that the consumer
can have more)
 When TU is maximum, the MU becomes zero
( this is the point where the customer stops )
 Afterwards, TU starts declining and MU becomes
negative
LAW OF DIMINISHING MARGINAL UTILITY(DMU)

 It is studied that the consumer always wants to

increase his consumption to attain greater levels
of satisfaction from the cardinal utility above. But
as the consumption increases, extra satisfaction
or marginal utility derived from each additional
unit starts to decline, which is known as the Law
of Diminishing Marginal Utility of the
commodity
LAW OF DIMINISHING MARGINAL UTILITY- GRAPHICAL REPRESENTATION