Answer to Question #211059 in Microeconomics for Arwah Bashir

Question

Q1) Explain the two associated concepts used to determine the satisfaction or utility of a consumer. Which measure

is sufficient to sketch a set of indifference curves?

Answer 1

1.      Cardinal utility. Utility is measured using numerical values. Models that use it use utils, which is a theoretical unit of utility.

2.      Ordinal utility. This uses rankings instead of values. The subjective differences between consumers and products are removed and all that remains are the ranked preferences.

Utility.