1) Think back to your last shopping trip, whether it be for food, school supplies/clothes, a cell phone, etc. Create a pros and cons chart (list) that illustrates the cardinal and ordinal theory approaches for this trip. Explain which method you would prefer to use and why.

2) 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. Explain which approach is better and why. Bring in an outside source to back up your rationale.

Answer:

1) Cardinal utility gives a value of utility to different option.Ordinal utility just ranks in terms of perference.

In the above question the last trip would be basic on Cardinal theory ,because we can't do our work according to the plan.If we go out any where for shopping or a trip we just go with a flow we never give rank to the terms.

There is a list of pron and con

Pron Con

Food school

Cloths enjoyment.

Money

Its better to used Cardinal theory because we do not plan any thing while we go for a trip.

2)

Cardinal theory is based on numerical scale and ordinal theory is based on rank. The utility approach to consumer demand theory is based on the assumption of Cardinal utility, while the indifference curve approch is based on ordinal theory. Both approaches are good enough in different cases, but the ordinal utility approach is better,because it uses ranks,according to which some choices are more preferable than others.

Ordinal utility theory states that while the utility of the particular good and service cannot be measured using a numercial scale bearing economic meaning in and of itself, pairs of alternatives combinations of good can be ordered such that one is considered by an individual to be worse than, equal to or better than other. This contrasts with Cardinal utility theory, which generally treats utility as something whose numerical value is mean in its own right.

So according to the utility approach to consumer demand ordinal theory is the best way to explain the demand. We can rank or we can give numerical to the good which we need as daily consumption. It also show the demand or need of that good,if it's in less use we can put it in the last number and we want that good we can put on the top so ordinal theory is good for the consumer to look for there approach.