The Assumptions or axioms of ordinal approach in economics (Part 1)

Ordinal approach

Following are the Assumptions or axioms of ordinal approach;

 

1) The consumer is rational:

            The basic postulate of this theory is that the consumer is rational. He is well aware of the market prices, his income and his preferences etc and in this situation he always wants to maximize his level of satisfaction.

 

2) Ranking of the Utility:

            This theory actually rejects the physical measurements of the utility. While it’s entire emphasis is based upon raking utility. This means that a consumer can express his preferences for the bundles of two commodities which give him equal, more or less satisfaction.

 

3) Goods are divisible:

                Like cardinal approach, this approach also assumes that the goods are divisible into smaller units. Accordingly, a consumer can also keep half and quarter units of two goods in the combination of two goods.

 

4) Preferences and Dispreferences:

A consumer possesses the views regarding the preference and dispreferences. His preferences shows which combinations of two goods he wishes to have, while his dispreferences shows which commodity bundles he does not wish to get, as the combinations of air pollution and the noise. Meanwhile we are confronted with the notion of ‘indifference curve’ which shows that the consumer is indifferent between pairs of commodities and does not prefer any one amongst them. This assumption shows that the consumer has to face the situation of either preference of indifference.

 

5) Axioms of completeness:

            This assumption of ordinal approach means that a consumer has a complete picture of the bundles of two commodities. In this regard, the following relationships exist;

 

* Consumer prefers combination A to B

* Consumer prefers combination B to A

* Consumer is indifferent between combination A and B`

 

This must be remembering that when a consumer prefers one combination to other, it is called ‘strong orderings’. While the inclusion of preferred combinations with indifferent combinations, is called ‘weak orderings’.

Read the 2nd part of this article … https://articlesacademy.com/assumptions-ordinal-approach-part-2/

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