Answer to Question #313190 in Microeconomics for felix

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

Explaining the line/curve A and C

Answer 1

The assumptions are;

• transitivity, which is based on defining a relationship between goods, such as if a consumer prefers good A to good B, and prefers good B to good C, then the consumer should prefer good A 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 over the other