Axioms - revealed preference theory, Microeconomics

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.  

Posted Date: 10/26/2012 3:37:55 AM | Location : United States







Related Discussions:- Axioms - revealed preference theory, Assignment Help, Ask Question on Axioms - revealed preference theory, Get Answer, Expert's Help, Axioms - revealed preference theory Discussions

Write discussion on Axioms - revealed preference theory
Your posts are moderated
Related Questions

Poverty: A state of having inadequate income or other resources to support a household (or group of households) at a basic standard of living. Poverty can be measured in absoluterr

The government notices that there is an output gap and decides to increase government spending with a stimulus package of $4 trillion in hopes that it will spur growth and stop une

illustrate a long-run equilbrium using diagrams for the gold market and for a representative gold mine

. Suppose fixed costs increase by $20. How will this affect TFC, TVC, TC, ATC, AVC and MC? Which numbers change and which stay the same?

Health and Life Expectancy: In addition to struggling on low income, many people in the developing nations fight a constant battle against malnutrition, disease and ill healt

Various studies have concluded that the demand for movie cinema attendance is responsive to advertising.  A study of one company, with movie cinemas in three neighbouring towns, sh

How does the production possibilietes curve relate to present day economics?

Answer in true or false 1.  "Improvements in environmental quality of a recreational site will, all other things being equal, increase consumer surplus of individuals that visit

Q. Strength of the multiplier in microeconomics? Multiplier: An initial stimulus to spending (in form of new consumer, business or government purchases) generally results in a