Chapter 2 - Consumer's equilibrium : Cardinal Approach
In this post, we will see how consumers decide which commodity should he purchase and the quantity to be purchased. Consumer's decision of consumption always depends upon utility and price of the commodity. Utility: Utility refers to wants satisfying power of a commodity. For example if a consumer is feeling hungry, then a Burger has the power to satisfy his hunger. This power of Burger to satisfy human want is Utility. Utility depends upon the intensity of want of the consumer. Higher the intensity of want higher the Utility. Refer - But is utility is measurable or not? There are two different approaches on this issue. Ordinal approach This approach was propounded by Allen and Hicks. According to Allen and Hicks utility can't be measured but can be ranked. Cardinal approach: This approach was propounded by Alfred Marshall. According to Alfred Marshall utility is measurable with the measuring rod of money. Cardinal approach : Cardinal approach defines utility a...
