A consumer is observed choosing the bundle (3, 1) at prices (1, 2) and the bundle (2, 2) at prices (2, 1). Her wealth is unknown and may be different for the two choices. (a) Assuming the consumer spends all of her wealth, are her choices consistent with the Weak Axiom of Revealed Preference (or is it impossible to determine)? Solution: At prices (1,2), the first bundle costs 5 and the second costs 6. At prices (2,1), the first bundle costs 7 and the second costs 6. Therefore, neither is revealed preferred to the other, which implies that the choices are consistent with WARP. (b) If the consumer may not be spending all of her wealth, are her choices consistent with the Weak Axiom of Revealed Preference (or is it impossible to determine)?

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Form Utility

The term utility in general refers to the satisfaction earned from usage of a particular product or service. Utility always plays an important role because it influences various important elements like demand & thereby the price of the good or service as well. Though utility is not easy to measure, various types of economic models can be used indirectly. There can be various types of utilities like economic utility, marginal utility, cardinal utility, form utility.