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
Is there a trade-off between inflation and unemployment? The Keynesian side posits that policies can indeed be used to stimulate demand - demand-side policies - and those mar

discuss and illustrates the following terms with diagrams1.inferior goods.2.normal goods,3.giffen goods

Problem: a) What factors would you consider when analysing the digital economy relative to e business? b) "The growing use of the internet by consumers and businesses has re

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

??????? ??? ???? ??? # 100 ?????? #Minimum ?????? ?????

Player 2   C B A 1,2 3,2 B 2,3 a, b         Player 1


Explain the approach of characterizing the modern economic environment. Modern economics gives various perspectives or angles to seem at real world economic issues. An economic

The market for labor can be studied use a supply and demand framework.  The demand for labor is from employers who use labor to produce goods and services.  The supply of labor is

Problem: a. With the help of diagrams, describe how the price and quantity of potatoes will change under the different circumstances: (i) A severe drought affecting its pro