Our students Francisca and Javier have a heated discussion about Axioms of Preference and Rational Consumer Choice, from which they raise questions and reflections regarding topics seen in class. You are asked to comment on each of these statements, justifying whether statement is true, false or uncertain. You should be supported by graphic analysis as appropriate. Statements that our students arrive at are as follows: (a) To have consistent ordering and represent convex indifference curves, only Axioms of order (Monotonicity) and Transitivity are needed. b) For a consumer to find equally preferred baskets from an initial basket, he must establish a substitution relationship between goods to stay on same indifference curve. c) Given consumer's income, the best he can do with respect to his consumption decision, is to find a situation where marginal utility per weight spent on good X is equal to marginal utility per weight spent on good Y.
Marginal Rate of Technical Substitution
MRTS reaches a manufacturer when a part of the product is lowered to sustain the manufacturing level when the other part is extended. It is the level of the quantity that is lowered when one extra volume is used, and the output is unchanged.
Preferences and Utility Analysis
Before understanding what is preference and utility analysis, it is very important to understand the terms preference and utility separately.
Course: Introduction to Microeconomics
1. Our students Francisca and Javier have a heated discussion about Axioms of Preference and Rational Consumer Choice, from which they raise questions and reflections regarding topics seen in class. You are asked to comment on each of these statements, justifying whether statement is true, false or uncertain. You should be supported by graphic analysis as appropriate.
Statements that our students arrive at are as follows:
(a) To have consistent ordering and represent convex indifference
b) For a consumer to find equally preferred baskets from an initial basket, he must establish a substitution relationship between goods to stay on same indifference curve.
c) Given consumer's income, the best he can do with respect to his consumption decision, is to find a situation where
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