Chapter 3

Chapter 3 - Kimberly Zhang Chapter 3 Basket: a combination...

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Kimberly Zhang Chapter 3 Basket: a combination of goods and services that an individual might consume Consumer preferences: indications of how a consumer would rank (compare the desirability of) any two possible baskets, assuming the baskets were available to the consumer at no cost o Assumptions Preferences are complete; consumers are able to rank any two baskets Preferences are transitive; consumers make choices that are consistent with each other (if A > B and B > E, then A >E) More is better Ordinal ranking: ranking that indicates whether a consumer prefers one basket to another, but does not contain quantitative information about the intensity of that preference Cardinal ranking: quantitative measure of the intensity of a preference for one basket or another Utility function: a function that measures the level of satisfaction a consumer receives from any basket of goods and services
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This note was uploaded on 09/13/2009 for the course 220 203 taught by Professor Sheflin during the Spring '09 term at Rutgers.

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Chapter 3 - Kimberly Zhang Chapter 3 Basket: a combination...

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