Consumer Preferences in Economics Model
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Consumer Preferences in Economics Model

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Questions and Answers

What can be inferred when a consumer chooses a more expensive market basket over a cheaper one?

  • The consumer is maximizing their utility
  • The consumer prefers the chosen market basket (correct)
  • The consumer has a higher income
  • The consumer is minimizing their costs

    • In a revealed preference scenario, what is the implication of choosing a market basket over another?

  • The consumer is indifferent between the two market baskets
  • The chosen market basket is preferred to the alternative (correct)
  • The consumer is not maximizing their utility
  • The chosen market basket is the cheapest option

    • If a consumer chooses market basket A over market basket B, and then chooses market basket B over market basket D, what can be inferred about market basket A?

  • A is preferred to D
  • A is preferred to all market baskets in the green-shaded area (correct)
  • A is not preferred to any market baskets
  • A is not preferred to B

    • What is the purpose of budget lines in revealed preference analysis?

    <p>To illustrate the consumer's possible choices</p> Signup and view all the answers

    What is the implication of a corner solution in a college trust fund scenario?

    <p>The student is spending the trust fund only on education</p> Signup and view all the answers

    If a consumer facing budget line l1 chooses market basket A, and a consumer facing budget line l2 chooses market basket B, what can be inferred about market basket A?

    <p>A is preferred to B</p> Signup and view all the answers

    What is the assumption of transitivity in consumer preferences?

    <p>If a consumer prefers basket A to basket B and basket B to basket C, then the consumer prefers basket A to basket C.</p> Signup and view all the answers

    What is the implication of the assumption that 'more is better than less' in consumer preferences?

    <p>Consumers always prefer more of any good to less.</p> Signup and view all the answers

    What is an indifference curve?

    <p>A curve representing all combinations of market baskets that provide a consumer with the same level of satisfaction.</p> Signup and view all the answers

    According to the figure, which basket is clearly preferred to basket A?

    <p>Basket E</p> Signup and view all the answers

    What is the role of additional information in comparing market baskets?

    <p>It is necessary to compare market baskets that are not comparable.</p> Signup and view all the answers

    What is the implication of the assumption that goods are desirable?

    <p>Consumers always prefer more of any good to less.</p> Signup and view all the answers

    What concept refers to the idea that consumers can compare and rank all possible market baskets?

    <p>Completeness</p> Signup and view all the answers

    In consumer behavior theory, what does it mean for a consumer to be 'indifferent' between two market baskets?

    <p>They are equally satisfied with either basket.</p> Signup and view all the answers

    What is the key assumption about preferences when considering the theory of consumer behavior?

    <p>Completeness</p> Signup and view all the answers

    What principle states that consumers can easily compare any two market baskets?

    <p>Transitivity</p> Signup and view all the answers

    Ignoring costs, it is noted that a consumer might prefer steak to hamburger but buy hamburger due to what reason?

    <p>Budget constraint</p> Signup and view all the answers

    Which of the following is true regarding completeness of preferences in consumer theory?

    <p>Consumers can compare all possible baskets.</p> Signup and view all the answers

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