This preview has intentionally blurred sections. Sign up to view the full version.
View Full DocumentThis preview has intentionally blurred sections. Sign up to view the full version.
View Full DocumentThis preview has intentionally blurred sections. Sign up to view the full version.
View Full DocumentThis preview has intentionally blurred sections. Sign up to view the full version.
View Full DocumentThis preview has intentionally blurred sections. Sign up to view the full version.
View Full DocumentThis preview has intentionally blurred sections. Sign up to view the full version.
View Full DocumentThis preview has intentionally blurred sections. Sign up to view the full version.
View Full Document
Unformatted text preview: Chapter Three Preferences 消消消消消 Where Are We in the Course? ◆ We are studying the 1 st of the three blocks of microeconomics: Consumer behavior, production theory, and market equilibrium ◆ Within the 1 st block, we are working on the 2 nd of the three components: choice set, preference, and consumer demand What Do We Mean by Preference? ( 偏偏 ) ◆ It refers to the ordered relationship among alternative choices given by an economic agent. ◆ In most economic literature, consumer preference is treated as the ultimate exogenous element. Preference Relations ◆ Comparing two different consumption bundles, x and y: – strict preference : x is more preferred than is y. – weak preference : x is as at least as preferred as is y. – Indifference : x is exactly as preferred as is y. Notations ◆ denotes strict preference; ◆ ∼ denotes indifference; ◆ denotes weak preference; ~ Preference Relations ◆ x y and y x imply x ∼ y. ◆ x y and (not y x) imply x y. ~ ~ ~ ~ Assumptions about Preference Relations ◆ Completeness : For any two bundles x and y it is always possible to make the statement that either x y or y x. ~ ~ Assumptions about Preference Relations ◆ Reflexivity : Any bundle x is always at least as preferred as itself; i.e. x x. ~ Assumptions about Preference Relations ◆ Transitivity : If x is at least as preferred as y, and y is at least as preferred as z, then x is at least as preferred as z; i.e. x y and y z x z. ~ ~ ~ Indifference Curves 无无无无无 ( 无 , 无无无无 ) ◆ Take a reference bundle x’. The set of all bundles equally preferred to x’ is the indifference curve containing x’ ; the set of all bundles y ∼ x’. ◆ Since an indifference “curve” is not always a curve a better name might be an indifference “set”. Indifference Curves x x 2 x x 1 x” x” x”’ x”’ x’ x’ ∼ ∼ x” x” ∼ ∼ x”’ x”’ x’ Indifference Curves x x 2 x x 1 z z x x y y x y z Indifference Curves x 2 x 1 x All bundles in I 1 are strictly preferred to all in I 2 ....
View
Full
Document
This note was uploaded on 12/06/2011 for the course BUSINESS MicroEco taught by Professor Luyu during the Spring '11 term at Tsinghua University.
 Spring '11
 Luyu
 Microeconomics

Click to edit the document details