Axioms - revealed preference theory, Microeconomics

Assignment Help:

Axioms:

Revealed preference theory is based on the axioms listed below. 

•  Consumer will spend all her income on goods. The consumer equilibrium always remains on the budget line. 

•  For any given price income situation, there corresponds a unique commodity bundle that the consumer chooses. Given the same income and prices, consumer will always choose the same bundle. 

•  For any given bundle, there is always a unique price income situation in which the consumer will be led to purchase that bundle. 

•  Weak axiom of revealed preference: If consumer chooses a bundle q0 in some price income situation (p0, M0) and spurns q1, where q1 is not more expensive than q0 at the prices at which q0 is bought, then q0 is revealed preferred to q1. Then q1 can never be revealed preferred to q0 when q0 is available. If in another price situation, consumer chooses the bundle q1, then q0 is not an available alternative at that price situation. 

•  Demand function is single valued in prices and income.  


Related Discussions:- Axioms - revealed preference theory

Utility-expenditure duality, Utility-Expenditure Duality: Consider the...

Utility-Expenditure Duality: Consider the minimisation of the  expenditures necessary to achieve a specified utility level. The solution for qi yields the compensated demand f

Rent, what is modern theory

what is modern theory

Complementary slackness condition, Consider the following linear program in...

Consider the following linear program in primal form and develop the dual formulation in a detailed manner. Use matrix notation in developing the dual. Clearly express all the dual

Economic Growth, the prevention of major swings in economic activity cn be ...

the prevention of major swings in economic activity cn be handled most easily by the financial or government sector?

Break-even point, How to I calculate the break-even point per unit in dolla...

How to I calculate the break-even point per unit in dollar amount and then determine whether there will be a profit or loss? Such as if the fixed costs were $75000. The variable co

Calculate the profit maximising price, Question: (a) Assume a firm ope...

Question: (a) Assume a firm operates in one location but serves on two distinct markets, namely, 1 and 2. The demand functions are: Market 1: P1 = 40 - 0.3 Q1 Market 2:

Herfendahl index, #qu3. An industry is composed of 20 firms, all with equal...

#qu3. An industry is composed of 20 firms, all with equal sales. The Herfendahl Index ratio in this industry is a. 1000 b. 500 c. 800 d. This cannot be determined from the informat

Total, Compare and contrast the different measures of revenue

Compare and contrast the different measures of revenue

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd