Question

Explain the difference between (i) inferior goods and normal goods and (ii) cardinal utility and ordinal utility. Give example in each case.

Answer 1

(i)

Basis of Difference	Normal Goods	Inferior Goods
Relationship with Income	These goods share a positive relationship with consumer's income.	These goods share an inverse relationship with consumer's income.
Example	Wheat, Milk, etc.	Coarse cereals, Public transportation- bus, rail pass

Basis of Difference	Cardinal Utility	Ordinal Utility
Valuation of  satisfaction	It implies that the satisfaction derived from the consumption of a particular good/service can be measured in absolute numbers.	It implies that the satisfaction derived from the consumption of a particular good/service cannot be measured in absolute numbers but can be ranked as per the preferences.
Measurement of satisfaction	It measures satisfaction in terms of utils.	It measures satisfaction in terms of ranks.
Measuring order	The consumption of goods and services that provide higher satisfaction are accorded higher utils.	The consumption of goods and services that provide higher satisfaction are accorded higher ranks. That is the good/service providing the highest satisfaction is accorded the first rank.
Example	Utility derived from the consumption of a glass of milk is 3 utils.	A glass of milk is ranked 1st while a glass of soda is ranked 2nd.