Explain the difference between cardinal and ordinal utility. Which is better to use when modeling consumer behavior and why?
Please provide the best answer for the statement.
Cardinal utility is measured in exact numbers (such as 1, 2, and 3) which can be added, subtracted, multiplied, or divided as used in mathematical equations. This adds difficulty to consumer behavior models because it assumes a consumer can measure their utility in exact numbers. To solve this dilemma, ordinal utility is preferred. Ordinal utility is measured in relative rankings of whether someone likes one good more or less than another rather than exact numbers. A consumer can state relative preferences without having to use precise numbers; which is called indifference curve analysis.
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"It is in the interest of each depositor to withdraw her money from a bank if all other depositors are doing the same, even when the bank's assets are sound." Discuss. As part of your answer clearly state whether the statement is true or false
What will be an ideal response?
The inflation tax refers to
a. the revenue a government creates by printing money. b. higher inflation which requires more frequent price changes. c. the idea that, other things the same, an increase in the tax rate raises the inflation rate. d. taxes being indexed for inflation.