Microeconomics (9th Edition) (Pearson Series in Economics)
9th Edition
ISBN: 9780134184241
Author: Robert Pindyck, Daniel Rubinfeld
Publisher: PEARSON
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Question
Chapter 3, Problem 1RQ
To determine
Significance of basic assumptions about individual preference.
Expert Solution & Answer
Explanation of Solution
There are four main assumptions about individual preference. They are as follows:
- (1) Preferences are complete: This assumption explains that the consumers are able to compare and rank the goods and services.
- (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) More is preferred to less: The third assumption explains that the consumers prefer to have all the goods in more quantity.
- (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.
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Chapter 3 Solutions
Microeconomics (9th Edition) (Pearson Series in Economics)
Ch. 3 - Prob. 1RQCh. 3 - Prob. 2RQCh. 3 - Prob. 3RQCh. 3 - Prob. 4RQCh. 3 - Prob. 5RQCh. 3 - Prob. 6RQCh. 3 - Prob. 7RQCh. 3 - Prob. 8RQCh. 3 - Prob. 9RQCh. 3 - Prob. 10RQ
Ch. 3 - Prob. 11RQCh. 3 - Prob. 12RQCh. 3 - Prob. 13RQCh. 3 - Prob. 1ECh. 3 - Prob. 2ECh. 3 - Prob. 3ECh. 3 - Prob. 4ECh. 3 - Prob. 5ECh. 3 - Prob. 6ECh. 3 - Prob. 7ECh. 3 - Prob. 8ECh. 3 - Prob. 9ECh. 3 - Prob. 10ECh. 3 - Prob. 11ECh. 3 - Prob. 12ECh. 3 - Prob. 13ECh. 3 - Prob. 14ECh. 3 - Prob. 15ECh. 3 - Prob. 16ECh. 3 - Prob. 17E
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Similar questions
- Using the consumer choice theory, explain how an individual decides what combinations of different products to buy. Answer question step by step and use graph.arrow_forwardHow is the ordinal utility concept different from the cardinal utility concept?arrow_forwardWhat is cardinal utility theory?arrow_forward
- What assumptions are necessary for supposing that individual preferences can be inferred and valued from the choices that individuals make?give a reasonarrow_forwardUsing the consumer choice theory, explain how an individual decides how to adjust her preferred combination of different products to buy when the price of just one product changes ?arrow_forwardThe law of diminishing marginal utility is consistent with the fact that people trade. Do you agree or disagree? Explain your answer.arrow_forward
- What is utility? the satisfaction a person gets from the consumption of a good a measure of production efficiency the difference between what a consumer is willing and able to pay for a good a measure of the amount of "need" people have for a goodarrow_forwardIn the theory of consumer behavior, what are the three basic assumptions about individual preferences? What is an indifference curve? What is the Marginal Rate of Substitution (MRS)?arrow_forwardThe Law of Diminishing Marginal Utility is just a theory that has no application to everyday life. None of us behaves as if we were subject to this law. True or False? Explain.arrow_forward
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