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Measurement and Valuation

Value relates to the benefits to be derived from objects, abilities or ideas. In economics, the value of an object, ability or idea is the utility of an economic resource to the person contemplating or enjoying its use. Economists use ordinal scale to indicate the level of satisfaction. In accounting, the value of an object, ability or idea is always measured in terms of money. Accountants use only cardinal scales.

 

Example: The statement ‘the value of one pizza is ₹ 100’ follows cardinal approach while the statement ‘I give first preference to pizzas and second to burgers’ follows an ordinal approach.





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