Answer to Question #314051 in Economics of Enterprise for rrurema

Question

1.     Do you know the assumptions which underlay the consumer’s preferences? Explain them.

Given the following information on price of Maize flour (MF) 10$, the price of Rice (R) as 15$ and income of consumer 150$ when the consumer needs to maximize his utility function  

Analyze the following graph on consumer behavior, through

a.      Explaining the line/curve A and C.

b.     Explaining what the movement from point D to B means theoretically, express that movement mathematically.

c.      Showing where is the equilibrium of consumer? Explain it.

d.     Finding the value of point F and E.

Answer 1

• 1.transitivity, which is based on defining a relationship between goods, such as if a consumer prefers good F to good E, and prefers good F to good E, then the consumer should prefer good F to good C.
• non-satiation, which states that more of a good is always better as long as it does not affect the consumer's ability to utilize all other goods. For example,
• completeness, which is when the consumer does not have indifference between two goods.For example,If faced with goods e.g apples versus oranges, every consumer does have a preference for one good