Cardinal Theory Of Consumer Behavior

2019/02/25

Cardinal theory of consumer behavior is an economic concept which analysis consumer choices, based upon satisfaction gained from consumption. It is a utility based theory which works on the assumption that satisfaction can perhaps be measured and based upon this quantum of satisfaction, buying decisions are taken. Util is the unit of measurement. Utility i.e. satisfaction from an item is naturally subjective.

I might get more satisfied eating chocolate rather than consuming a fruit juice and thus allot chocolate higher value than the juice. However for you juice might bring more satisfaction and thus would higher util points. It is thus a subjective analysis, varying as per individual choices. In fact it is possible that with time preferences might change. For example consider a case where you are happy with your slim fit jeans today and attribute it a high standard when it comes to measuring satisfaction.

However as trend changes and new fashion jeans are introduced in market, your shopping preferences changed and you are no longer satisfied with slim fit jeans, as you once were.In fact with every next unit of purchase, satisfaction decreases. For example the first pair of jeans gets a high util score. Next pair of same jeans, will get a low score and thus with every consecutive purchase, score continues to diminish.

Thus the theory rests upon consumer choices, which are prone to changes. Also for the theory to work, consumers must demonstrate rational behavior. For example you cannot be taking on indefinite loans to meet expensive demands. Your satisfaction should come upon spending what you can rationally spare.

Limited Resources Unlimited Wants

As consumers we have limited resources which can be used to satisfy various wants. However call it good marketing or our unending craving; we constantly want more and more. It is not however possible to get as much and thus a choice must be made. When there is a question of selecting i.e. deciding, the cardinal theory of consumer behavior seeks respite from the satisfaction gained.

As an illustration take a situation where you are buying anything as simple as a ball pen to write. However when you reach market, shopkeeper shows you a new fountain pen which writes smoothly, you instead of a ball pen, buy this new one. The idea behind purchase – increased satisfaction.

Criticism And Ordinal Theory Of Consumer Behavior  

Upon understanding the concept well it might occur to you that you deciding amongst two or more things of the same category say pens, not essentially by giving them a score of satisfaction. That is, when you decide you tend to make a rank system, wherein the thing which satisfies most is ranked best, while other object which satisfies lesser is ranked below and so on so forth.

Thus economists criticized the concept of cardinal theory of consumer behavior and instead propagated an alternate theory, the ordinal theory, which ranked different choices as per satisfaction attained. This change made it easier because anyway satisfaction cannot be quantified and thus ranking was much easier.

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