The cardinalist and ordinalist approach to consumer behaviour discuss?

Answer 1

Consumer Behavior from a Cardinalist and Ordinalist

Approach

Utility means satisfaction which consumers derive from

commodities and services by purchasing different units of

money.From Wikipedia, the free encyclopedia "Ineconomics,

utility is a measure of satisfaction;it refers to the total

satisfaction received by a consumer from consuming a good or

service. "Given this measure, one may speak meaningfully of

increasing or decreasing utility, and thereby explain economic

behavior in terms of attempts to increase one's utility. Utility

is often affected by consumption of various goods and services,

possession of wealth and spending of leisure time.

According to Utilitarian's, such as Jeremy Bentham (1748-

1832) and John Stuart Mill (1806-1873), theory "Society should

aim to maximize the total utility of individuals, aiming for "the

greatest happiness for the greatest number of people".

Another theory forwarded by John Rawls (1921-2002) would

have society maximize the utility of those with the lowest

utility, raising them up to create a more equitable distribution

across society.

Utility is usually applied by economists in such constructs as

the indifference curve, which plot the combination of

commodities that an individual or a society would accept to

maintain at given level of satisfaction. Individual utility and

social utility can be construed as the value of a utility function

and a social welfare function respectively. When coupled with

production or commodity constraints, under some

assumptions, these functions can be used to analyze Pareto

efficiency, such as illustrated by Edgeworth boxes in contract

curves. Such efficiency is a central concept in welfare

economics.In finance, utility is applied to generate an

individual's price for an asset called the indifference price.

Utility functions are also related to risk measures, with the

most common example being the entropic risk measure.