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

Compare and contrast the different measures of revenue

1. The figure below is historical production data from the Kuparuk River field. The OOIP is 5,332,979 Mstb and cumulative recovery through 12/31/2004 is 1,971,200,654 stb.

Normal 0 false false false EN-IN X-NONE X-NONE MicrosoftInternetExplorer4

Export Entrepreneurship: This need be developed by providing necessary facilities and making export an attractive and profitable business proposition. In this connection, it

MRP systems - basic inputs  It has been estimated that in the USA where MRP was originated and developed by Oliver Wight and George Plossl (1985), virtually all Fortune 500 ma


For each of the following scenarios, you use a SS & DD diagram to demonstrate the effect of a given shock on equilibrium price and quantity in specified competitive market. Explain

What does the basic neoclassical, or traditional, model of economics assume about markets? It supposes that markets are perfectly competitive and smoothly functioning, and thos

Problem 1: (a) Explain the common set of problems that developing countries usually face. (b) In your opinion, which of the problems described in part (a), are more signifi