Profile
Settings
Refer your friends
Sign out
What Is An Utility?
When a product or service satisfies the buyer or consumer, that satisfactory feeling felt by the consumer is called the utility of that product or service. This utility differs from product to product and depends on the consumer’s perception and mentality; what you enjoy may not be enjoyed by others, and others may not get satisfaction with the utility. Some say this utility cannot be measured and can only be felt, yet some theories believe in quantifying this utility. Many theories describe and analyze this utility. The two very famous theories are cardinal and ordinal utility. The basic thought process behind the theories is that cardinal theory believes in measuring the utility felt in each unit. In contrast, the ordinal utility believes this emotion felt in utility cannot be measured. The feeling of satisfaction felt by consumers after using the product is measured in units by the theory made by Alfred Marshall. This is called cardinal utility. For example – the ice cream of that brand has 50 utils. Alfred Marshall believed that just like time, length, mass etc., are measured in units. Similarly, the utility can also be measured in a unit. And just like units kilograms, seconds, or meters, the utility unit is “UTILS”. Whereas professor JR Hicks believed that utility is an emotion, it cannot be defined in the number of units. It may only help in qualitative analysis and is not quantifiable. Therefore there is no unit of utility according to this ordinal utility theory.The Major differences between Cardinal and Ordinal utility
| Parameters | Cardinal utility | Ordinal utility |
|---|---|---|
| Ideology | As Alfred Marshall made the unit UTILS, the good feeling called the product’s utility, felt by the consumer, can be measured in quantifiable terms. | The satisfactory feeling called the utility of the product, felt by the consumer cannot be measured. But the feeling or emotion can be qualitatively arranged in order of preferences, like less or more. |
| Units | The unit of cardinal utility is utils. | There is no unit of ordinal utility; it is arranged in relative order. Like less or more. |
| Reality and practical use | It is practically not possible to measure emotions and feelings in units. | It is a more realistic way of telling your feelings and emotions like you can say you liked something more than the other. |
| Theory | Professor Alfred marshall | devised this theory. Professor JR Hicks devised this theory. |
| Psychology | It is thought to be measurable even though the utility is a feeling. | These feelings are subjective, hence here, utility is considered as non-quantifiable. |
| Numbers involved | Cardinal utility quantifies utility in terms of numbers. | The ordinal utility believes that the utility cannot be expressed in numbers. |
| Also called as | Utility analysis | Commodity indifference curve |
| Examples | I get 40 utils after using the company’s headphones with 60 utils while using Bluetooth AirPods. | I prefer Bluetooth AirPods over headphones because AirPods are better than the latter. |
| Applications | Applications include welfare economics, marginalism, intertemporal utility | Applications include subjective conclusions on the utility of products in day to day life |
