Ch 2 consumer theory basics

Eco 204 s ajaz hussain do not distribute notice that

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: ual snob, he refuses to give us an answer. Because he’s unwilling to rank these DJs we cannot model his behavior. Our second consumer is DJ Ajax still clubbing at the ripe old age of 75. His responses are: 7 ECO 204 CHAPTER 2 Modeling Consumer Choice and Behavior: Preferences and Budget Constraints (this version 2012-2013) University of Toronto, Department of Economics (STG). ECO 204, S. Ajaz Hussain. Do not distribute. ⏟ ⏟ ⏟ Notice that DJ Ajax is able to rank all “bundles” of DJs (i.e. Ajax has “complete preferences”) and that his preferences are logical (i.e. Ajax has “transitive preferences”) because if he tells us that: ⏟ Then if his rankings are logical it should be that Art Department Seth Troxler: indeed, that’s exactly what he told us so that his preferences are logical (they have to be; he didn’t go to Ryerson). Our last consumer is DJ Rye-high, who is a DJ at night and while he’s supposed to be a student at Ryerson University by day, he’s also a DJ by day. His responses are: ⏟ ⏟ ⏟ Notice that DJ Rye-high is also able to rank all “bundles” of DJs (i.e. Rye-High has “complete preferences”) but unlike DJ Ajax (at U of T), Rye-high’s preferences are illogical (i.e. Rye-High has “intransitive preferences”) because when tells us that: ⏟ However, DJ Rye-high tells us that Tiesto illogical. Seth Troxler. Thus, while Rye-high is able to rank all bundles his rankings are Here’s another example which shows how consumers aren’t always able (or willing to) indicate their preferences and even if they are able to, that the rankings aren’t always logical. Suppose someone (you?) has the following preferences over the three colors: Red, Blue and Orange: Q: How do you feel about Red vs. Blue? A: Q: How do you feel about Blue vs. Orange? A: Q: How do you feel about Red vs. Orange? A: This consumer has complete preferences (she can rank any pair of these three colors) but she does not have transitive preferences because if she says that and then if her preferences were logical sh...
View Full Document

Ask a homework question - tutors are online