Suppose that Fiona likes cashews better than almonds and likes almonds better than walnuts. She likes pecans equally well as hazelnuts and prefers hazelnuts to almonds. Can we characterize Fiona’s preferences of being “complete”? Can we characterize them of being “transitive”? Justify your answer.

Suppose that Fiona likes cashews better than almonds and likes almonds better than walnuts. She likes pecans equally well as hazelnuts and prefers hazelnuts to almonds. Can we characterize Fiona’s preferences of being “complete”? Can we characterize them of being “transitive”? Justify your answer.

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter20: Consumer Choice: Maximizing Utility And Behavioral Economics

Section20.1: Utility Theory

Problem 2ST

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Joyce consumes x1 and x2 together in fixed proportions. She always consumes 1 unit of x2 for 2 units of x1. What is the utility function that describes her preference?
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Bottles of water sell for 1 euro and slices of chocolate cake sells for 3 euros. Suppose Jack, whose preferences satisfy all of the basic assumptions of consumer choice theory, buys 5 bottles of water and one slice of chocolate cake every day. At this consumption bundle, his MRS of bottles of water for slices of chocolate cake is 3 (i.e. he is willing to give up 3 bottles of water to get an additional slice of cake). Which of the following is true? (Hint: draw this situation with bottles of water on the vertical axis and slices of cake on the horizonal axis). A. Jack could increase his utility by buying fewer bottles of water and more slices of cake. B. Jack could increase his utility by buying more bottles of water and less chocolate cake. C. Jack could not increase his utility because it is already at a maximum level. D. Jack could increase his utility by buying more bottles of water and more chocolate cake.
Bottles of water sell for 1 euro and slices of chocolate cake sells for 5 euros. Suppose Jack, whose preferences satisfy all of the basic assumptions of consumer choice theory, buys 5 bottles of water and one slice of chocolate cake every day. At this consumption bundle, his MRS of bottles of water for slices of chocolate cake is 3 (i.e. he is willing to give up 3 bottles of water to get an additional slice of cake). Which of the following is true? (Hint: draw this situation with bottles of water on the vertical axis and slices of cake on the horizontal axis). Jack could not increase his utility because it is already at a maximum level. Jack could increase his utility by buying more bottles of water and less chocolate cake. Jack could increase his utility by buying more bottles of water and more chocolate cake. Jack could increase his utility by buying fewer bottles of water and more slices of cake.
Revealed Preference is when an individual's behavior reveals information about a person's tastes and preferences,i.e. what he likes and dislikes and how much he likes or dislikes a good. The individual demand schedule and an individual's demand curve reveals a person's tastes and preferences for a good. Specifically it reveals how much each successive unit of the good he consumes is worth to him. We can say this differently by saying the maximum price a person is willing to pay for a particular unit of the good is how much that unit of the good is worth to him. This value is revealed by his behavior or his willingness to voluntarily give a certain amount of money in exchange for that unit of the good. In other words, how many units of a good a person demands/buys at any given price. Look at the image.
Revealed Preference is when an individual's behavior reveals information about a person's tastes and preferences,i.e. what he likes and dislikes and how much he likes or dislikes a good. The individual demand schedule and an individual's demand curve reveals a person's tastes and preferences for a good. Specifically it reveals how much each successive unit of the good he consumes is worth to him. We can say this differently by saying the maximum price a person is willing to pay for a particular unit of the good is how much that unit of the good is worth to him. This value is revealed by his behavior or his willingness to voluntarily give a certain amount of money in exchange for that unit of the good. In other words, how many units of a good a person demands/buys at any given price. Look at the images below. multiple choices can be correct. which answers are correct? look at graph.
Remy and Emile consume only cheese (x,) and strawberries (x2). Remy's preferences are described by UR = min{xf, 2x5}while Emile's preferences are described by UE = xf + x5 . Remy has 8 pieces of cheese and 1 pint of strawberries while Emile has 4 pieces of cheese and 3 pints of strawberries. (a) Draw an Edgeworth box with x, on the horizontal axis and x, on the vertical axis. Position Remy on the bottom left corner and Emile on the top right corner. Indicate the total number of units of x, and x2. Label the endowment allocation. Show Remy's and Emile's indifference curves. (b) Derive the equation of the contract curve. In your graph in (a), draw the contract curve. (c) Set x1 as the numeraire, i.e., assume p, = 1 and p2 = p. Find the competitive equilibrium. Hint: For Emile to consume at a Paretoefficient allocation, what should the prices be? (d) Redraw the Edgeworth box. Indicate the equilibrium allocation, e. Draw the equilibrium budget line.
Another instance when people are likely not to spend a dime (or a minute) on an item is when they have a dislike for mixing the item with other items available. In this case, we say the consumer has ‘non-convex preferences’ and indifference curves are bowed out from the origin. In plain language, the consumer has a preference for binging. We often feel this way towards our favorite social media app. Consider a kid who has four hours a day to spend on social media. They enjoy spending time on Snapchat (x) or spending time on Twitter (y). a) Write the kid’s time constraint and illustrate it in a graph where you measure time spent on Snapchat along the horizontal axis and time spent on Twitter along the vertical axis. This kid’s utility from time spent on Snapchat and time spent on Twitter is U(x,y) = 4x2+ y2. b) In your graph, draw a couple of the kid’s indifference curves. Notice how the kid’s |MRSY,X| increases along each curve as he spends more time on Snapchat and less time on…
What assumptions are necessary for supposing that individual preferences can be inferred and valued from the choices that individuals make?give a reason