A consumer is consuming an affordable consumption bundle...

Name: a consumer is consuming an affordable consumption bundle which statement is true regarding this bundle it must lie on or below the budget constraint it must lie on the budget constraint it m 83514
Uploaded: 2023-11-17T02:11:38-08:00
Duration: 3 min 41 s
Channel: Supreeta N
Description: a consumer is consuming an affordable consumption bundle which statement is true regarding this bundle it must lie on or below the budget constraint it must lie on the budget constraint it m 83514

A consumer is consuming an affordable consumption bundle. Which statement is TRUE regarding this bundle? It must lie on or below the budget constraint. It must lie on the budget constraint. It must lie above the budget constraint. It must lie above or below the budget constraint.

Consider three consumption bundles x⁰, x¹, and x², which a consumer purchases at price vectors p⁰, p¹, and p² respectively. Each bundle represents consumption levels of three separate goods. Let xʲ = (x₁ʲ, x₂ʲ, x₃ʲ), pʲ = (p₁ʲ, p₂ʲ, p₃ʲ), j = 0,1,2. p⁰ = (1,1,1) x⁰ = (12,12,12) p¹ = (1,1,2) x¹ = (5,19,9) p² = (1,2,1) x² = (27,11,1) a. Use the algebraic statement of the weak axiom of revealed preference to determine: i) Is bundle 0 revealed preferred to bundle 1? Is 1 revealed preferred to 0? ii) Is bundle 1 revealed preferred to bundle 2? Is 2 revealed preferred to 1? iii) Is bundle 2 revealed preferred to bundle 0? Is 0 revealed preferred to 2? b. Do these choices satisfy the weak axiom of revealed preference (WARP)? c. Do these choices satisfy the strong axiom of revealed preference (SARP)? d. Are these choices consistent with the hypothesis that the consumer maximizes utility subject to a budget constraint? Explain.

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