ch3lec - Varian, Ch 3: Preferences Diaz, Cho, Rust February...

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Varian, Ch 3: Preferences Diaz, Cho, Rust February 3, 2003
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Consumption bundles • Consumers have preferences over many goods and services. We list the quantities of these goods and services in a vector or consumption bundle x=(x 1 ,x 2 ,…,x n ) where n is the number of goods and services. Example: if n=2 and good 1 is apples and good 2 is oranges, the vector x=(2,3) corresponds to consuming 2 apples and 3 oranges.
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Preferences over bundles • We use the symbol to denote “strictly preferred”. Thus, x y denotes the statement, “the consumer strictly prefers bundle x to bundle y”. • We use the symbol to denote “indifferent between”. Thus x y denotes the statement, “the consumer is indifferent between bundle x and bundle y”. • We use the symbol to denote “weakly preferred”. Thus x y denotes the statement, “the consumer “prefers bundle x to bundle y”. ~ ~ ~ ~
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Assumptions about preferences • Preferences are complete: for any two consumption bundles x and y, either x
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ch3lec - Varian, Ch 3: Preferences Diaz, Cho, Rust February...

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