Practicing Success
Case study: Suppose your father comes back home from work and you offer him a glass of juice. The first glass of juice will give him great satisfaction. The satisfaction from second glass of juice will be relatively less. With further consumption, a stage will come when he would not require any more glass of water. If he is forced to consume even one glass that would lead to disutility. |
Which of the following is the limitation of "Cardinal analysis", which eventually gave rise to "Ordinal analysis"? |
Utility can be measured in numbers Utility can be measured in ranks Cardinal utility does not have a measuring unit All of the above |
Utility can be measured in numbers |
The correct answer is Option 1: Utility can be measured in numbers "Cardinal analysis" measures the utility in the form of numbers. Utility is the want satisfying power of the commodity. This is the limitation of the "Cardinal analysis" that it measures the satisfaction in numbers as many economists argued that in real life no one says that they got 10 utils of satisfaction by eating pizza. This gave rise to "Ordinal analysis" where, commodities could be ranked and no monetary value was attached to satisfaction received. |