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Pindyck/Rubinfeld, Microeconomics, Eighth Edition Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. choice will be higher than utility from the second choice. How much higher is not important. An ordinal utility function generates a ranking of bundles and no meaning is given to the magnitude of the utility number itself. Cardinal utility implies that the intensity of
preferences maybe quantified, and that the utility number itself has meaning. An ordinal ranking is all that is needed to rank consumer choices. It is not necessary to know how intensely a consumer prefers basket
A over basket B; it is enough to know that
A is preferred to B. 9. Upon merging with the West German economy, East German consumers indicated a preference for Mercedes-Benz automobiles over Volkswagens. However, when they converted their savings into deutsche marks, they flocked to Volkswagen dealerships. How can you explain this Share with your friends: