Ordinalist theory of utility is what?

к анализу) была предложена Эджуортом, Парето и Фишером. Ordinalist theory of utility (ordinal approach to analysis) was proposed by Edzhuort, Pareto and Fisher. In the 30s of the 20th century it was finally finalized and is now considered the most widespread. . Let us further consider what the ordinal utility theory is .

General information

рассматривает субъективное удовлетворение, которое покупатель получает от блага. Ordinalist theory of utility considers the subjective satisfaction that the buyer receives from the good. This concept is based on several axioms. It is worth saying that the opinions of economists about their number and names diverge. Thus, some authors point to two, others to three axioms.

Cardinal utility theory

It is represented by the views of the Austrian school. предполагает, что стоимость одной единицы блага сводится к трудовым затратам и определяется степенью важности потребности, удовлетворяемой за счет этой единицы. The quantitative theory of utility assumes that the cost of one unit of the good is reduced to labor costs and is determined by the degree of importance of the demand satisfied by this unit. As the last was proposed. E. Ut. базируется на постулатах Госсена. The cardinal utility theory is based on Gossen's postulates. The general idea of the provisions was as follows. A rational buyer will increase consumption until the moment when the marginal utility from one good equals the corresponding indicator of the other. This principle is called the second law of Gossen. If we interpret this rule in modern language, then it will be formulated as follows. A buyer with a limited amount of resources should receive from each good as much as necessary to equalize the utility for each of them separately. Subsequently it was proved that it is impossible to measure the indicator. The utility of the good is a subjective category. Accordingly, it is impossible to evaluate it as one for all. . In this regard, an alternative concept emerged - the ordinal utility theory .

Comparative characteristics

не принимает во внимание субъективные предпочтения. Ordinalist theory of utility differs from cardinalism in that it does not take into account subjective preferences. For the analysis, the concept uses modeling. It allows you to clearly visualize the essence of the concept, to illustrate the action of axioms. считает возможным качественный анализ удовлетворения от использования благ. In addition, the ordinal utility theory differs from the cardinalist one in that it considers a qualitative analysis of satisfaction from the use of goods possible.

The essence of the concept

основывается на принципе, состоящем в том, что предельное удовлетворение благами измерить нельзя. Ordinalist theory of utility is based on the principle that maximum satisfaction with good can not be measured. Only the order of preference of sets can be assessed. The consumer measures the satisfaction of not each individual good, but the utility from a certain group of them. Within the framework of the concept, the buyer orders his preferences. He systematizes the choice of a particular group of benefits in terms of satisfaction. For example, the first set of consumers considers more useful for themselves, the second - less, the third - even less, and so on. Such a systematization allows you to identify the buyer's preferences for groups of objects. не позволяет установить различия удовлетворения от наборов благ. Moreover, the ordinalist theory of utility does not allow us to establish differences in satisfaction from sets of benefits. Simply put, in a practical sense, the buyer can determine the group of objects to which he will give preference. However, at the same time he can not determine how much better one is better.

Axioms

As was said above, the experts' opinions on their number differ. For a better understanding of the concept, let us consider three axioms. The consumer's equilibrium in the ordinal theory of marginal utility implies the ordering of preferences. The buyer can always either name the best set of benefits, or recognize their equivalence. The second axiom presupposes the transitivity of preferences. This means that to make a decision, the buyer needs to consistently re-prioritize. Preferences from one set of benefits are transferred to others. The axiom about the desaturation of needs says that buyers always prefer a larger volume of any good to less. This principle, however, does not apply to the so-called antblagag. They have negative utility, because they reduce the level of welfare of the buyer. Such anti-blag can be called noise, air pollution.

Indifference curve and budget line

For the first time, the graphical preference system was used in 1881 by Edgeworth. The indifference curve and the budget line in the model always have a point of tangency. The latter plays the role of limiting the set of available goods. The budget line reflects the kits, upon acquisition of which the buyer completely spends the allocated money. It crosses the axes at points illustrating the maximum amount of benefits that a subject can receive for the funds available to him at certain prices. The restriction indicates that the aggregate expenditure should be the same as the income. With a decrease or increase in the latter, the budget line also shifts. All the sets corresponding to its points are accessible to the buyer. Those that are located higher and right, are more. Accordingly, they are not available to the buyer. The indifference curve illustrates a set of sets for which the consumer does not differentiate. Any group of benefits provides the same level of satisfaction. Simply put, the graph shows alternative sets that have the same level of utility.

Properties

The indifference curve has the following properties:

1. The one above and to the right of the other line is considered preferable to the buyer.
2. Always has a negative slope. This is due to the fact that rational consumers prefer a larger volume of any group of goods to a smaller one.
3. Has a concave shape. This is due to the reduction of marginal rates of substitution.
4. Never cross another curve. As a rule, the segments illustrate the decreasing rates of substitution of one good for another.

The sets on curves that are farther from the origin of coordinates are given a greater preference than those located on the less distant lines.

Map

It is used to describe the subject's preferences for all product groups and clothing. A curve map is a way to display a utility function for a particular customer. It allows you to get an idea of the tastes of an individual consumer. The map shows the rate of replacement of two benefits at any level of their consumption. When it is said that the tastes of buyers are known, the whole family of curves is meant, and not the current ratio of two specific products. On the map, each curve covers points with equal utility.

The rate of substitution

This concept is considered the main working term in ordinal theory. The replacement rate reflects the number of units of the good, from which the buyer should refuse to purchase an additional unit of another product. In other words, it expresses the ratio of the maximum utility of the two goods. The limiting norm is the desire of the subject to exchange one product for each unit of the goods of another set. At the same time, he does not acquire and does not lose satisfaction from using the good. The limit norm is an indicator according to which one product is replaced by another without losing or gaining utility. The values of this quantity are always negative. This is due to the fact that an increase in the number of purchased units of a single product implies a decrease in the use of the other. In connection with the fact that the indifference curve has a convex, directed to the origin of the form, the norm usually decreases in the course of consumption growth. This phenomenon is referred to as a decreasing maximum rate of substitution.