Statements that our students arrive at are as follows: (a) To have a consistent ordering and represent convex indifference curves, ONLY axioms of ORDER and TRANSITIVITY are needed, omitting others. b) For a consumer to find baskets that are equally preferred from an initial basket, he must establish a substitution relationship between goods to stay on same indifference curve. c) Given a consumer's income, best that can be done for 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".
Course: Introduction to
Topic: Consumer Theory and Preferences
You are asked to comment on each of following statements, justifying whether statement is true, false or uncertain. You should be supported by graphical analysis as appropriate.
Statements that our students arrive at are as follows:
(a) To have a consistent ordering and represent convex indifference curves, ONLY axioms of ORDER and TRANSITIVITY are needed, omitting others.
b) For a consumer to find baskets that are equally preferred from an initial basket, he must establish a substitution relationship between goods to stay on same indifference curve.
c) Given a consumer's income, best that can be done for Consumption Decision is to find a situation where
Introduction
The indifference curve represents all the combinations of goods that give the same satisfaction to the consumer. As we know all combination of indifference curve gives the same satisfaction and the consumer will be indifferent between them.
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