Preferences Handout - Using the above example, show which...

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ECON 302 – Finley Edwards Preferences Handout 1. Frank eats fruit for breakfast each morning. Given the choice between an apple and an orange, he always eats an orange. Given a choice between an orange and a banana he always chooses the orange. Assuming that Frank is rational, the weak preference relation is Complete, Reflexive and Transitive. However, the strict preference relation does not. Using the above example, show which of the three assumptions is violated for the strict preference relation. Assuming that Frank is rational, the weak preference relation is Complete, Reflexive and Transitive. However, the indifference relation does not.
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Unformatted text preview: Using the above example, show which of the three assumptions is violated for the indifference preference relation. 2. Plot three indifference curves for 5 dollar bills and 1 dollar bills. 3. Peter sends all his money on bells and whistles. His indifference curves take the form 1 1 2-= ax x where a is any constant. In the particular case of a=24 he is indifferent between the following pairs of (bells, whistles): (4,6), (8,3), (12,2). Sketch the indifference curve that passes through these three points. What is the MRS at (4,6)? What is the MRS at (8,3)? What is the MRS at (12,2)?...
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This note was uploaded on 05/05/2010 for the course ECONMOICS ECON 203 taught by Professor Josephpetry during the Spring '10 term at University of Illinois, Urbana Champaign.

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Preferences Handout - Using the above example, show which...

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