Utility- Well utility can be defined as the satisfaction people derive from consumption or usage of goods or service. It is measured in terms of "Utils".
People like to utilize fully from their resources or we can say people want to think rationally i.e they want to derive most of the benefits as possible,so they want to use their resources fully.
For example- Imagine a person who went to a restaurant and for rs.120 he judges that food A will yield 15 utils and food B will yield 13 utils,then that person realizes that eating food B will be more beneficial and satisfying. So,here the person wants to utilize the resource(which is rs.120) to get their best satisfaction.
But it also depends on certain circumstances,i.e. tastes and preferences differs from person to person and it impacts hugely on decision making and also the income of people also depends.
Cardinal Utility- The utility in which the satisfaction is measured in terms of numerically. It is a quantitative approach. It's measured in terms of UTILS.
Example- You went to visit Taj Mahal and Qutub Minar,and after visiting you give ratings on the basis of your satisfaction. On a scale of 5,you rate Taj Mahal highly with 4 and Qutub Minar with 3,this is known as cardinal utility.
Ordinal Utility- The utility in which the satisfaction can be measured in terms of ranks. It is a qualitative approach.
Example- As in previous example you gave ratings higher of Taj Mahal so it will be ranked higher than Qutub Minar.
People like to utilize fully from their resources or we can say people want to think rationally i.e they want to derive most of the benefits as possible,so they want to use their resources fully.
For example- Imagine a person who went to a restaurant and for rs.120 he judges that food A will yield 15 utils and food B will yield 13 utils,then that person realizes that eating food B will be more beneficial and satisfying. So,here the person wants to utilize the resource(which is rs.120) to get their best satisfaction.
But it also depends on certain circumstances,i.e. tastes and preferences differs from person to person and it impacts hugely on decision making and also the income of people also depends.
How to measure Utility?
There are two ways in which utility can be measured. They are- cardinal and ordinal.Cardinal Utility- The utility in which the satisfaction is measured in terms of numerically. It is a quantitative approach. It's measured in terms of UTILS.
Example- You went to visit Taj Mahal and Qutub Minar,and after visiting you give ratings on the basis of your satisfaction. On a scale of 5,you rate Taj Mahal highly with 4 and Qutub Minar with 3,this is known as cardinal utility.
Ordinal Utility- The utility in which the satisfaction can be measured in terms of ranks. It is a qualitative approach.
Example- As in previous example you gave ratings higher of Taj Mahal so it will be ranked higher than Qutub Minar.
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