Question

In which utility analysis, utility is subjective and measurement of utility in numerical terms is not possible.

• A. Cardinal Utility
• B. Total Utility
• C. Ordinal Utility
• D. Marginal Utility

Hint:

Approaches to Utility Analysis: - Cardinal Utility: - Assumes utility is measurable (in "utils"). - Concepts: Total Utility (TU), Marginal Utility (MU). - Law of Diminishing Marginal Utility. - Used for deriving demand curves (Marshallian approach). - Ordinal Utility: - Assumes utility can be ranked (preferences) but not measured numerically. - Concept: Indifference Curves, Budget Line. - Marginal Rate of Substitution (MRS). - Used for deriving demand curves (Hicksian/Slutsky approach). The statement "utility is subjective and measurement of utility in numerical terms is not possible" is a hallmark of the ordinal utility approach.

Answer 1

The Correct Option is C

Step 1: Understand the different approaches to utility analysis in economics.
Utility refers to the satisfaction or benefit derived by consuming a product or service.
There are two main approaches to measuring or analyzing utility:
Step 2: Define Cardinal and Ordinal Utility.
- Cardinal Utility Analysis: Assumes that utility is measurable and quantifiable in numerical terms, like 1, 2, 3 units (sometimes called "utils").
Consumers are assumed to be able to state exactly how much satisfaction they get from consuming a good.
This approach allows for comparison of utility levels (e.
g.
, good A gives twice as much utility as good B).
Concepts like marginal utility and total utility are often discussed within this framework.
- Ordinal Utility Analysis: Assumes that utility is subjective and cannot be measured numerically.
Instead, consumers can only rank their preferences for different goods or combinations of goods (e.
g.
, prefer A to B, or indifferent between A and B).
This approach uses indifference curves and budget lines to analyze consumer behavior.
It does not require assigning specific numerical values to satisfaction.

Step 3: Evaluate the terms given in options.
Option (1) Cardinal Utility: Assumes utility is numerically measurable.
This contradicts the statement "measurement .
.
.
in numerical terms is not possible.
" Option (2) Total Utility: The total satisfaction derived from consuming all units of a good.
This is a concept often associated with cardinal utility.
Option (3) Ordinal Utility: Assumes utility is subjective and can only be ranked (ordered), not measured numerically.
This matches the statement in the question.
Option (4) Marginal Utility: The additional utility derived from consuming one more unit of a good.
This is also often associated with cardinal utility (though the concept of diminishing marginal rate of substitution in ordinal utility is related).

Step 4: Identify the correct utility analysis.
The utility analysis where utility is subjective and numerical measurement is not possible is Ordinal Utility Analysis.
This matches option (3).