The utility approach to consumer demand theory is based on the assumption of cardinal utility, while the indifference curve approach is based on ordinal utility. Which approach is better? Why?

Answers

Answer 1

The discussion about how consumers make choices when buying things is focused on the idea of happiness and how to measure it. The utility approach uses numbers to measure how much someone likes something.

What is the utility approach

The indifference curve approach just puts things in order of preference without using numbers. Both ways have their strengths and weaknesses, and which one is "better" depends on the situation and beliefs of the person making the decision.

Utility Approach (Cardinal Utility):

Strengths:

Cardinal utility helps us measure and compare how much we like different things.This helps understand why people choose to buy certain things based on their budget and what they want the most.

Weaknesses

It's hard to prove the idea of cardinal utility because we can't see or measure utility directly.It's hard to compare how happy different people are because everyone values things differently.

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