Cardinalist vs. Odinalist Theory in Economics

The main difference between the 2 theories is the criterion of measurable benefits. The Cardinal theory argues that profit can be measured, while the usual theory argues that profit cannot be measured. Let\’s explore both theories more deeply.
Cardinalist theory deals with concepts such as utility, total utility, and marginal utility. By practicality, we understand the subjective sense of realization that arises from the consumption of goods. Therefore, buying a bottle of water can satisfy your thirst need and benefit from the purchase. Marginal utility is a special expression that expresses how much the total utility increases when you consume more units of a given good. In our case, the marginal benefit is what we get after drinking 2. A bottle of water.
znázornění investice
Cardinalist theory works with the law of decreasing marginal utility. The law states that with an increase in the amount of goods consumed, profits tend to decrease. In the example of water, this can again be demonstrated very well. For example, suppose you drink 5. A bottle of water is not as good as the one we first drank when we were most thirsty.
On the other hand, the usual theory cooperates with the fact that utility cannot be expressed numerically.This is not surprising, because it is, after all, a qualitative value that can not be reliably measured. Therefore, it works in units of use, not so-called. The interference set includes a set of consumer combinations, each of which brings the same benefit, and the elements of the set are not preferred over the others. This theory works with the familiar indifferent curve, or budget line, for economists.
finanční analýza
Cardinal and ordinary theories are two basic concepts of economic theory, and if you really want to understand economics, they certainly shouldn\’t escape your attention. When we think about their meaning, we move from a logical level to a philosophical level, asking ourselves whether we can measure usefulness or human satisfaction.