Answer:

Cardinal and Utility Approach Overview

The cardinal and utility approach are both methods of analyzing consumer preferences in economics. The cardinal approach uses quantitative measurements such as money to measure consumer preferences, whereas the utility approach uses qualitative measurements such as satisfaction. Both methods are used to understand consumer behaviour and to make predictions about what decisions consumers will make.

Differences Between Cardinal and Utility Approach

The main difference between the two approaches is how consumer preferences are measured. The cardinal approach uses money as the measurement, whereas the utility approach uses a “utility” or satisfaction level. This means that the cardinal approach is more focused on the financial aspect of consumer decisions and the utility approach is more focused on the emotional or satisfaction aspect of consumer decisions.

Cardinal Approach

The cardinal approach is based on the assumption that consumer preferences can be measured in terms of money. The idea is that by measuring how much money a consumer is willing to spend on a good or service, economists can gain insight into their preferences and make predictions about what decisions they will make.

Utility Approach

The utility approach is based on the idea that consumer preferences can be measured in terms of satisfaction or “utility”. This means that instead of measuring consumer preferences in terms of money, economists measure them in terms of how satisfied or “utile” a consumer is with a good or service. This approach is more focused on the emotional or satisfaction aspect of consumer decisions, rather than the financial aspect.

Related Questions

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