Cardinal Utility vs Ordinal Utility

Last Updated On -19 Apr 2025

The idea of utility in economics aids in our comprehension of consumer behavior, or how people make decisions and find enjoyment in products and services. However, there is disagreement among economists about the best technique to quantify utility.

Two main strategies have resulted from looking for a technique to quantify utility:

The Cardinal Utility
Utility Ordinal

Every one of these ideas offers a unique perspective on how to evaluate human pleasure and clarifies the reasoning behind price, demand, and customer preferences.

What is Utility?

Let's quickly review the definition of utility before delving into the two strategies. The satisfaction or advantage a customer receives from using a good or service is known as utility. You're earning utility each time you sip your preferred coffee or watch your favorite Netflix program. Let's now examine the two primary interpretations of this satisfaction offered by economists.

Read more about the Consumer Equilibrium Marginal Utility.

What is the meaning of Cardinal Utility?

The idea of "cardinal utility" makes the assumption that utility can be quantified. This implies that the degree of satisfaction a person receives from a good can be given a defined value.

For example, according to the consumer, "I get 20 utils from tea and 10 from coffee" suggests that tea provides twice as much enjoyment, or if you consume two chocolates, the first one will provide you with fifty utils. You get 30 utils from the second.

To claim that you are completely satisfied, you can add the utilities.This method enables accurate mathematical computations and aids in the development of early hypotheses by economists, such as consumer equilibrium and the law of diminishing marginal utility.

Key features of Cardinal Utility

Utility can be measured.
A fictitious unit of usefulness called "utils" can be used to quantify it.
It assumes that marginal utility can be calculated
The values from utility are comparable across goods
It is the sum of all utils obtained from consumption
Makes it possible to calculate both total and marginal utility
Simplifies mathematical modeling

What are the Limitations to Cardinal Utility?

Since utility is a subjective concept, it cannot be quantified in practice.
Too theoretical—satisfaction cannot really be quantified.
Different people have a different method of deriving utility
The whole concept is hypothetical and lacks empirical data

What is the meaning of Ordinal Utility?

Ordinal Utility, on the other hand, makes the assumption that utility can only be ranked according to preference and cannot be quantified. Customers are unable to quantify contentment precisely. Instead, they can rate their preferences. "I prefer tea over coffee," a customer may say, but not "Tea gives me twice the satisfaction." This serves as the basis for contemporary demand theory and indifference curve analysis.

For example, Pizza, burgers, and fries are your three snack options.You assign them a ranking:

Pizza is the most popular. Burger is normal. The least favorite food is fries. Ordinal utility is at work there. You have expressed your preference without providing a numerical value.

Key Features of Ordinal Utility

More realistically, people rank their preferences by nature.
doesn't use fictitious or abstract units like "utils"
It is based in the ranking of preferences
No assumption regarding the measurability of satisfaction
It leads to the indifference curve analysis
It assumes the rational behaviour
The substitution and income effects with budget constraints are measured with its help

Limitations to Ordinal Utility

Some mathematical models require more precision.
It does not account for the degree to which a person favors one good over another.
It lacks the mathematical precision that is required for some economic models
It is difficult to quantify which quantity is better than the other one

What are the key differences between Cardinal Utility vs Ordinal Utility?

Ordinal utility is thought to be more realistic and useful in contemporary economics. Although early theories were based on cardinal usefulness, the notion of quantifying satisfaction is mainly out of date. Ordinal preferences and instruments like revealed preference theory and indifference curves are increasingly used by economists today.

The key differences between Cardinal Utility vs Ordinal Utility is tabulated below:

Cardinal utility	Ordinal utility
It is measurable in numbers, utils	It is ranked in the order of preferences
The approach is quantitative	The approach is qualitative
“Tea gives 50 utils, coffee gives 20”	“I prefer coffee over tea”
The law of diminishing marginal utility, and consumer equilibrium is based on this	The indifference curve theory and the budget line is based on this
This is less realistic	This is more realistic
Early utility theories are based on it	The modern consumer analysis is based on this