Modern economics uses which type of consumer theory?

Correct option is B

The correct answer is (B) Ordinal utility

Explanation:
• Modern consumer theory is based on Ordinal Utility, which suggests that utility (satisfaction) cannot be measured in absolute units but can be ranked in order of preference.
• For example, a consumer can say they prefer an apple to an orange, but they cannot scientifically state they get '10 units' more satisfaction from the apple.
• This approach was developed by economists like J.R. Hicks and R.G.D. Allen using tools like 'Indifference Curves'.
• It is considered more realistic than the older Cardinal Utility theory, which assumed satisfaction could be quantified in 'utils'.

Information Booster:
• The Ordinal Utility approach avoids the controversial assumption that utility can be added or compared across different individuals (interpersonal comparison of utility).

Additional Knowledge:
• Cardinal utility (Option A): This was the classical view (Marshallian approach) where utility was treated as measurable, similar to weight or height.
• Total utility (Option C): This refers to the overall sum of satisfaction derived from consuming a certain quantity of a good. It is a concept within both cardinal and ordinal frameworks, but not the 'type' of theory itself.
• Public utility (Option D): This refers to organizations that maintain the infrastructure for a public service (like water, electricity, or gas), and is not a theory of consumer behavior.