Choices and Preferences of consumer:
Now that we have described what the consumer can do, we will tackle the question of what he/she will do. It is here that we must make some assumptions about behavior, and as I remarked above, we will assume that the consumer always chooses the best alternative from his/hers budget set. Choice theorists (and economists studying microeconomic behavior) start by defining objects of choice. In our case it is consumption bundles which are these objects. A consumption bundle is simply a list of quantities one for each good (a pair in our two-good world). The budget set describes the set of all feasible consumption bundles, and given this set we may contemplate a process in which we ask our consumer to rank all feasible bundles. By this we mean that we ask whether he/she thinks that bundle A is better or worse than bundle B, or if they are equally good. If he/she says that A is better (worse) than B, we say that the consumer has expressed a “preference” for A over B (B over A). If he/she says that A and B are equally good we say that the consumer is “indifferent” between A and B.
It is convenient to use mathematical symbols to express the possible relationships between A and B (it becomes tedious to write e.g. “A is preferred to Bj etc.):
A › B → A is preferred to BA ›∼ B → A is at least as good as BA ∼ B → A indifferent to B.
Note here that the symbol ? shows strict preference, while ›∼ shows weak preference, which means that A could be equally good as B, but it is never the case that B is better than A.
It is very convenient to make some assumptions about preferences, which rules out certain “irrational” choice behavior. For example, it would seem natural to rule out the possibility that the consumer first say that: A › B and then B › A (of course, over time, preferences may change but we assume that preferences are expressed at one point in time). Another set of assumptions about preferences (or axioms of choice) are:
Assumption 1: Complete preferences. The consumer is able to compare all possible bundles, and rank them.
Assumption 2: Transitivity. In a comparison between three bundles (A, B and C), assume that the consumer says that A is at least as good as B, and that B is at least as good as C, it then follows that A is at least as good as C, or,
A ›∼ B & B ›∼ C → A ›∼ C
These axioms imply that preferences are rational. The meaning of rationality in this context is that preferences, and choice behavior, are consistent. If transitivity did not hold, for example, it would imply that we could have that A ›∼ B & B›∼ C & C ›∼ A. In this case all bundles are at least as good compared to any other bundle, and it would be impossible to pick out any “best” bundle, which is what we want to do. Hence, the assumption of rational preferences is indispensable to any theory of choice.
Assumption 3: “More is better” (Greed assumption). This is not a crucial assumptions to make, the basic theory works well without it (assumptions 1 and 2 are indispensible). However, it will simplify our analysis because no goods will ever be left unused (and we have to decide what to do with them). It means that consumers always will use their entire budget to spend on goods.
Assumption 4 & 5: Continuity and strict convexity. These are “technical” (or rather mathematical) assumptions, but they are necessary to rule out some “weird” or unusual behavior. As assumption 3, they are not necessary, but convenient.
Latest technology based Economics Online Tutoring Assistance
Tutors, at the www.tutorsglobe.com, take pledge to provide full satisfaction and assurance in Intermediate Microeconomics homework help via online tutoring. Students are getting 100% satisfaction by online tutors across the globe. Here you can get homework help for Intermediate Microeconomics, project ideas and tutorials. We provide email based Intermediate Microeconomics homework help. You can join us to ask queries 24x7 with live, experienced and qualified online tutors specialized in Intermediate Microeconomics. Through Online Tutoring, you would be able to complete your homework or assignments at your home. Tutors at the TutorsGlobe are committed to provide the best quality online tutoring assistance for Economics homework help and assignment help services. They use their experience, as they have solved thousands of the Economics assignments, which may help you to solve your complex issues of Intermediate Microeconomics. TutorsGlobe assure for the best quality compliance to your homework. Compromise with quality is not in our dictionary. If we feel that we are not able to provide the homework help as per the deadline or given instruction by the student, we refund the money of the student without any delay.
tutorsglobe.com kidney machines assignment help-homework help by online renal failure tutors
Frequency distribution tutorial all along with the key concepts of Types of Frequency Distribution, Ungrouped Frequency Distribution, Grouped Frequency Distribution, Reasons for making a frequency distribution
tutorsglobe.com cloning of sheep assignment help-homework help by online cloning tutors
finding answer for maximal flow problem, maximal flow problem algorithm, sample assignments, www.tutorsglobe.com offers assignment help - homework help in operation research.
wwww.tutorsglobe.com offers statistics homework help, statistics assignment help, online tutoring assistance, maths solutions by online qualified tutor’s help.
One way in which long-term performance can be rewarded is through the granting of directors’ share options. This sort of reward though has provoked considerable controversy.
tutorsglobe.com prevention of hiv assignment help-homework help by online emerging viral infections in humans tutors
Sex Determination and Sex Linkage tutorial all along with the key concepts of Sex Determination, Sex Determination in Drosophila and Sex Determination in Man
www.tutorsglobe.com offers Hour to Hour or 100% Bonus Plan homework help, assignment help, case study, writing homework help, online tutoring assistance by accounting tutors.
tutorsglobe.com mendels experiments assignment help-homework help by online mendels laws of inheritance tutors
it is an instrument that records the heart’s electrical activity. it gives information regarding to cardiac disorders.
Expansion of Gases tutorial all along with the key concepts of Kinetic Molecular Theory of Gas, Boyle's Law, Charles' Law, Cubic Expansivity of a Gas, Gay - Lussac's Law, Gas Law or Equation, Ideal Gas Equation, Intermolecular Energy and Forces
interference tutorial all along with the key concepts of wave nature of light, coherent source, interference, constructive interference, destructive interference, optical path, young's double slit experiment, fringe separations
tutorsglobe.com glycogen assignment help-homework help by online carbohydrate metabolism tutors
www.tutorsglobe.com offers computer system engineering homework help, assignment help, case study, writing homework help, online tutoring assistance by computer science tutors.
1934553
Questions Asked
3689
Tutors
1474406
Questions Answered
Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!!