Microeconomics (9th Edition) (Pearson Series in Economics)
Microeconomics (9th Edition) (Pearson Series in Economics)
9th Edition
ISBN: 9780134184241
Author: Robert Pindyck, Daniel Rubinfeld
Publisher: PEARSON
Question
Book Icon
Chapter 3, Problem 1RQ
To determine

Significance of basic assumptions about individual preference.

Expert Solution & Answer
Check Mark

Explanation of Solution

There are four main assumptions about individual preference. They are as follows:

  1. (1) Preferences are complete: This assumption explains that the consumers are able to compare and rank the goods and services.
  2. (2) Preferences are transitive: The second assumption explains that the preferences of consumers are transitive or constant. In other words, if a consumer prefers apple over orange and orange over banana, then he would prefer apple over banana.
  3. (3) More is preferred to less: The third assumption explains that the consumers prefer to have all the goods in more quantity.
  4. (4) Diminishing marginal rate of substitution: The forth assumption explains that the consumer can give up fewer amount of commodity in order to obtain more of other goods.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
What can observing people’s actual choices tell us about their preferences? Whatis this approach called?
what is the principle of utility?
Do you think the model of consumer equilibrium describes how people really make the decisions on what to order to in a restaurant to maximize their utility? Is there a better model to measure consumer choice?
Knowledge Booster
Background pattern image
Similar questions
SEE MORE QUESTIONS
Recommended textbooks for you
Text book image
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning
Text book image
Microeconomics
Economics
ISBN:9781337617406
Author:Roger A. Arnold
Publisher:Cengage Learning
Text book image
Exploring Economics
Economics
ISBN:9781544336329
Author:Robert L. Sexton
Publisher:SAGE Publications, Inc
Text book image
Macroeconomics
Economics
ISBN:9781337617390
Author:Roger A. Arnold
Publisher:Cengage Learning