Editing Utility (section)

===Cardinal===
{{Main|Cardinal utility}}

Cardinal utility states that the utilities obtained from consumption can be measured and ranked objectively and are representable by numbers.<ref name=":0">{{Cite book|last=Dominick|first=Salvatore|title=Principles Of Microeconomics|publisher=Oxford Higher Education/Oxford University Press|year=2008|isbn=9780198062301|location=New Delhi|pages=60}}</ref> There are fundamental assumptions of cardinal utility. Economic agents should be able to rank different bundles of goods based on their preferences or utilities and sort different transitions between two bundles of goods.<ref>{{Cite journal|last1=Lin|first1=Chung-Cheng|last2=Peng|first2=Shi-Shu|date=2019|title=The role of diminishing marginal utility in the ordinal and cardinal utility theories|url=https://onlinelibrary.wiley.com/doi/abs/10.1111/1467-8454.12151|journal=Australian Economic Papers|volume=58|issue=3|pages=233–246|doi=10.1111/1467-8454.12151|s2cid=159308055|via=Wiley Online Library}}</ref>

A cardinal utility function can be transformed to another utility function by a positive linear transformation (multiplying by a positive number, and adding some other number); however, both utility functions represent the same preferences.<ref>{{Cite journal|last=Moscati|first=Ivan|date=2013|title=How Cardinal Utility Entered Economic Analysis, 1909-1944|journal=SSRN Electronic Journal|doi=10.2139/ssrn.2296881 |doi-access=free |hdl=10419/149700 |s2cid=55651414 |s2cid-access=free |issn=1556-5068|hdl-access=free }}</ref>

When cardinal utility is assumed, the magnitude of utility differences is treated as an ethically or behaviorally significant quantity. For example, suppose a cup of orange juice has utility of 120 "utils", a cup of tea has a utility of 80 utils, and a cup of water has a utility of 40 utils. With cardinal utility, it can be concluded that the cup of orange juice is better than the cup of tea by the same amount by which the cup of tea is better than the cup of water. This means that if a person has a cup of tea, they would be willing to take any bet with a probability, p, greater than .5 of getting a cup of juice, with a risk of getting a cup of water equal to 1-p. One cannot conclude, however, that the cup of tea is two-thirds of the goodness of the cup of juice because this conclusion would depend not only on magnitudes of utility differences but also on the "zero" of utility. For example, if the "zero" of utility were located at -40, then a cup of orange juice would be 160 utils more than zero, a cup of tea 120 utils more than zero. Cardinal utility can be considered as the assumption that quantifiable characteristics, such as height, weight, temperature, etc can measure utility.

[[Neoclassical economics]] has largely retreated from using cardinal utility functions as the basis of economic behavior. A notable exception is in the context of analyzing choice with conditions of risk (see [[#Expected utility|below]]).

Sometimes cardinal utility is used to aggregate utilities across persons, to create a [[social welfare function]].