please teach explain step by step, 2. A consumer is observed making two choices. First, he faces prices p = (1,3) with wealthw = 8 but is limited to purchasing no more than 3 units of good 1. Given this budget set, hechooses the bundle x = (2,2). Second, he faces prices p' = (2, 1) and wealth w' = 8 with nolimit on his purchases of either good. Given this budget set, he chooses the bundle x' = (4,0).(a) Identify all revealed preferences given these choices.Solution: Since x is affordable when x' is chosen, r' is revealed preferred to x. Sincex' exceeds the limit on good 1 when x is chosen, x is not revealed preferred to x'.(b)Do this consumer's choices satisfy the Weak Axiom of Revealed Preference?Solution: Yes. WARP says that the two bundles cannot be revealed preferred to eachother; here, only r' is revealed preferred to x.(c) Could these choices result from the consumer choosing optimally given some mono-tone, convex, and continuous preferences? Explain your answer carefully; you do nothave to provide a formal proof.Solution: For these to be optimal choices with such preferences, the indifference curvethrough a must lie entirely on or above the budget line associated with (p, w), and simi-larly for x' for the budget line associated with (p', w'). Because each of these bundles liesbelow the other budget line, this implies that the indifference curves must cross, whichis impossible. Alternatively, note that (3,1) is a convex combination of x and x', so forconvex preferences must be weakly preferred to a (the less preferred bundle between aand x'). But then the bundle (3,5/3) must be strictly preferred x, contradicting that ais optimal given the initial budget set.

The term "customer preference" refers to a group of presumptions that centre on consumer decisions…

2. A consumer is observed making two choices. First, he faces prices p = (1,3) with wealth w = 8 but is limited to purchasing no more than 3 units of good 1. Given this budget set, he chooses the bundle x = (2,2). Second, he faces prices p' = (2, 1) and wealth w' = 8 with no limit on his purchases of either good. Given this budget set, he chooses the bundle z' = (4,0). Identify all revealed preferences given these choices. (a) (L) Solution: Since x is affordable when r' is chosen, r' is revealed preferred to x. Since x' exceeds the limit on good 1 when x is chosen, x is not revealed preferred to a'. Du th:.. in antinforth Wale Anima and Duna?

2. A consumer is observed making two choices. First, he faces prices p = (1,3) with wealth w = 8 but is limited to purchasing no more than 3 units of good 1. Given this budget set, he chooses the bundle x = (2,2). Second, he faces prices p' = (2, 1) and wealth w' = 8 with no limit on his purchases of either good. Given this budget set, he chooses the bundle z' = (4,0). Identify all revealed preferences given these choices. (a) (L) Solution: Since x is affordable when r' is chosen, r' is revealed preferred to x. Since x' exceeds the limit on good 1 when x is chosen, x is not revealed preferred to a'. Du th:.. in antinforth Wale Anima and Duna?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Do marketers create needs?
Rob decided to drive to school rather than take the school bus. What was the opportunity cost of Rob’s decision?
Explain & give examples of the relationship between reality and discourse.
Assess the importance of Elinor Ostrom’s work for economists?
does utilitarianism have good or bad effects on business?
What’s a economic example
Do economists have a role in policymaking on non-economic topics?
What are examples of society's widely accepted economic goals?
Give one merit and one demerit of a socialist economy?
What are the other forms of basic economic studies? Define each.
What are the major course learning outcomes from studying a microeconomics course?