Show that the preferred relation is transitive for mac

Reference no: EM13177828

Mac Rowe doesn't sweat the petty stuff. In fact, he just cannot detect small differences. He consumes two goods, x and y. He prefers the bundle (x,y) to the bundle (x',y') if and only if (xy - x'y' > 1) . Otherwise he is indifferent between the two bundles.

a. Show that the relation of indifference is not transitive for Mac. (Hint: Give an numerical example.)

b. Show that the preferred relation is transitive for Mac.

Reference no: EM13177828

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