A utility function that generates a ranking of market baskets in order of most to least preferred is called:
A) a cardinal utility function.
B) an ordinal utility function.
C) either an ordinal or a cardinal function. Both types of functions use this ranking.
D) neither an ordinal nor a cardinal function. Neither type uses this ranking.

Question

Quizplus · Accepted Answer

An ordinal utility function generates a ranking of preferences without assigning any specific numerical values to each basket. This ranking allows us to determine which basket is preferred over another, but not by how much. Therefore, a ranking of market baskets in order of most to least preferred is an example of an ordinal utility function.

A Utility Function That Generates a Ranking of Market Baskets