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43 econ - 20:44 Ch.3 1.Consumerpreferences...

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20:44 Ch. 3 theory of consumer behavior     Description of how consumers allocate  incomes among different goods and services to maximize their well-being. Consumer behavior is best understood in three distinct steps: 1.Consumer preferences 2.Budget constraints 3.Consumer choices 3.1 market basket  (or  bundle )      List with specific quantities of one or more  goods. Basic Assumptions of Preferences: Completeness- Preferences are assumed to be  complete . In other words,  consumers can compare and rank all possible baskets.  You prefer A to B, or prefer B to A, or will be indifferent between the two (equally  satisfied) 2. Transitivity-Consistent on how you rank preferences  Transitivity means that if a consumer prefers basket  to basket  and basket  to basket  C , then the consumer also prefers  to  C .
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