Rubinstein2005-page142 - October 21, 2005 12:18 master...

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October 21, 2005 12:18 master Sheet number 140 Page number 124 Review Problems The following is a collection of questions I have given in exams during the last few years. Problem 1 (Princeton 2002) Consider a consumer with a preference relation in a world with two goods, X (an aggregated consumption good) and M (“membership in a club,” for example), which can be consumed or not. In other words, the consumption of X can be any nonnegative real number, while the consumption of M must be either 0 or 1. Assume that consumer preferences are strictly monotonic, con- tinuous, and satisfy the following property: Property E : For every x there is y such that ( y ,0 ) Â ( x ,1 ) (that is, there is always some amount of money that can compensate for the loss of membership). 1. Show that any consumer’s preference relation can be repre-
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This note was uploaded on 12/29/2011 for the course ECO 443 taught by Professor Aswa during the Fall '10 term at SUNY Stony Brook.

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