EBK MICROECONOMICS
5th Edition
ISBN: 9781118883228
Author: David
Publisher: YUZU
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Question
Chapter 4, Problem 10RE
To determine
To evaluate:
The ways the revealed preference analysis aids in learning about the preferences of a consumer without falling for the need of utility function.
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Students have asked these similar questions
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Based on several observations, people at older ages tend to buy more luxurious products than when they were younger. Does this mean that diminishing marginal utility of money declines as people age?
In analyzing consumer behavior,
economists often use indifference
curves to represent a consumer's
preferences. An indifference curve
shows the different combinations
of two goods that provide the
same level of utility to the
consumer. As one moves along
an indifference curve, the level of
utility
reflecting the
consumer's willingness to trade
off one good for another while
maintaining the same level of
overall satisfaction.
A) Increases
B) Decreases
C) Remains constant
D) Fluctuates unpredictably
Chapter 4 Solutions
EBK MICROECONOMICS
Ch. 4 - Prob. 1RECh. 4 - Prob. 2RECh. 4 - Prob. 3RECh. 4 - Prob. 4RECh. 4 - Prob. 5RECh. 4 - Prob. 6RECh. 4 - Prob. 7RECh. 4 - Prob. 8RECh. 4 - Prob. 9RECh. 4 - Prob. 10RE
Ch. 4 - Prob. 4.1PCh. 4 - Prob. 4.2PCh. 4 - Prob. 4.3PCh. 4 - Prob. 4.4PCh. 4 - Prob. 4.5PCh. 4 - Prob. 4.6PCh. 4 - Prob. 4.7PCh. 4 - Prob. 4.8PCh. 4 - Prob. 4.9PCh. 4 - Prob. 4.10PCh. 4 - Prob. 4.11PCh. 4 - Prob. 4.12PCh. 4 - Prob. 4.13PCh. 4 - Prob. 4.14PCh. 4 - Prob. 4.15PCh. 4 - Prob. 4.16PCh. 4 - Prob. 4.17PCh. 4 - Prob. 4.18PCh. 4 - Prob. 4.19PCh. 4 - Prob. 4.20PCh. 4 - Prob. 4.21PCh. 4 - Prob. 4.22PCh. 4 - Prob. 4.23PCh. 4 - Prob. 4.24PCh. 4 - Prob. 4.25PCh. 4 - Prob. 4.26PCh. 4 - Prob. 4.27PCh. 4 - Prob. 4.28PCh. 4 - Prob. 4.29PCh. 4 - Prob. 4.30P
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- Explain how consumer equilibrium is reached using marginal utility analysis.arrow_forwardWhat does revealed preference theory based on? a) Utility and demand b) Observed consumer behavior c) Utility and demand d) The assumption of indifferencearrow_forwardAnother instance when people are likely not to spend a dime (or a minute) on an item is when they have a dislike for mixing the item with other items available. In this case, we say the consumer has ‘non-convex preferences’ and indifference curves are bowed out from the origin. In plain language, the consumer has a preference for binging. We often feel this way towards our favorite social media app. Consider a kid who has four hours a day to spend on social media. They enjoy spending time on Snapchat (x) or spending time on Twitter (y). a) Write the kid’s time constraint and illustrate it in a graph where you measure time spent on Snapchat along the horizontal axis and time spent on Twitter along the vertical axis. This kid’s utility from time spent on Snapchat and time spent on Twitter is U(x,y) = 4x2+ y2. b) In your graph, draw a couple of the kid’s indifference curves. Notice how the kid’s |MRSY,X| increases along each curve as he spends more time on Snapchat and less time on…arrow_forward
- Q.1 a. According to the theory of revealed preference, what is the best way to measure consumer preferences? b. In what way is using demand functions to measure consumer's surplus an example of the revealed preference approach?arrow_forwardExplain how revealed preferences indicate which goods or activities give aperson the most utility.arrow_forwarduestion1:Donna and Jim are two consumers purchasing strawberries and chocolates. Jim’s utility function is U (x, y) = xy and Donna’s utility function is U (x, y) = x2y where x denotes strawberries and y denoteschocolates. Jim’s marginal utility functions are MUX=y and MUy=x while Donna’s are MUX=2xy and MUy=x2. Jim’s income is $100, and Donna’s income is $150. What is the optimal bundle for Donna if the price of strawberries is $2 and the price of chocolate is $4? What is the optimal bundle for Jim, and for Donna, when the price of strawberries rises to $3?Question2:Consider a one-period ecoarrow_forward
- A consumer is choosing between two consumption points: point A contains 2 eggs and 2 pieces of bacon and point B contains 2 eggs and 3 pieces of bacon. Which of the following is true? Select the correct answer below: Point A yields a higher utility than point B. Point B yields a higher utility than point A. Both points A and B yield the same level of utility It is not possible to answer with the given information.arrow_forwardWhat is the difference between ordinal utility and cardinal utility? Explain why the assumption of cardinal utility is not needed in order to rank consumer choices!arrow_forwardRevealed Preference is when an individual's behavior reveals information about a person's tastes and preferences,i.e. what he likes and dislikes and how much he likes or dislikes a good. The individual demand schedule and an individual's demand curve reveals a person's tastes and preferences for a good. Specifically it reveals how much each successive unit of the good he consumes is worth to him. We can say this differently by saying the maximum price a person is willing to pay for a particular unit of the good is how much that unit of the good is worth to him. This value is revealed by his behavior or his willingness to voluntarily give a certain amount of money in exchange for that unit of the good. In other words, how many units of a good a person demands/buys at any given price. Look at the image.arrow_forward
- Revealed Preference is when an individual's behavior reveals information about a person's tastes and preferences,i.e. what he likes and dislikes and how much he likes or dislikes a good. The individual demand schedule and an individual's demand curve reveals a person's tastes and preferences for a good. Specifically it reveals how much each successive unit of the good he consumes is worth to him. We can say this differently by saying the maximum price a person is willing to pay for a particular unit of the good is how much that unit of the good is worth to him. This value is revealed by his behavior or his willingness to voluntarily give a certain amount of money in exchange for that unit of the good. In other words, how many units of a good a person demands/buys at any given price. Look at the images below. multiple choices can be correct. which answers are correct? look at graph.arrow_forwardSuppose it is “All You Can Eat” Night at your favorite restaurant. Once you’ve paid $69.95 for your meal, how do you determine how many helpings to consume? Should you continue eating until your food consumption has yielded $69.95 worth of satisfaction? What happens to the marginal utility from successive helpings as consumption increases?arrow_forwardSuppose a consumer’s preferences can be represented by the utility function U(X,Y) = Min (2X,Y). Also, suppose the consumer has $300 to spend and the price of Good X is PX = $2 and the price of Good Y is PY = $5. If the consumer maximizes their utility subject to their budget constraint, how much of Good X and how much of Good Y will the consumer purchase? X* = Y* =.arrow_forward
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