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
Value Added:Value added in a particular stage of production equals value of total output, less the value of intermediate products (comprising raw materials, capital equipment and o


Using the Wage Rate and Output per Hour as indicated on the table below, calculate the output per dollar wage and unit labor cost. Then decide on the optimal wage rate for this c

how can a price ceiling make consumers better-off? under what conditions might it make them worse off?

Which drug is likely to be the most profitable for its producer (in terms of average “per-drug” profit)?

Demand Pull Inflation and Cost-Push Inflation: Demand Pull Inflation: It describes a sustained increase in the general price level that is caused by a permanent increase in n

Define the generality of economic theory in the modern economics. Generality of Economic Theory An economic theory is based onto assumptions imposed onto economic environmen

Derivation Of Ordinary Demand Function: Suppose,   and q 1  = (Q 1 1 , Q 2 1 ,..., Q n 1 )T. Let M0 be the money income and p 0 q 0  = M 0  and p 0 q 0 ≥ p 0 q 1 , where p

Normal 0 false false false EN-IN X-NONE X-NONE MicrosoftInternetExplorer4 The demand schedule c

Under specified assumptions, derive the square-root formula of the Baumol-Tobin's inventory model of transactions demand for money and briefly describe the effect of a one period i