The consumer choice theory aims, among other things, at modeling preferences that will guide the consumer in his choices. To do this, an assumption will be made: the consumer is able to rank any two consumption bundles as to their desirability, that is, the consumer is aware of his own tastes and knows how to use them rationally in order to maximize his utility. In the neoclassical model, preferences relations are established following from an evaluation of the consumer's behaviour. Hence, it is considered that if he always chooses a consumption bundle A over a consumption bundle B, even where B is available and affordable, then A is strictly preferred to B (A > B). Similarly, other preferences relations are recognised: indifference (A ~ B) which means that A is equally preferred to B and vice versa; weak preference (A ≥ B) which means that A is preferred at least as much as B. An indifference curve (IC) is a set of bundles all equally preferred to each others. In other words, the IC that goes through A is the set of all bundles y such that A ~ y.
[...] The assumptions about how preferences work are thus necessary for the theory to be coherent. Three axioms about preferences: the consumer is rational Among the assumptions we are to analyse, three are so fundamental that they are called of consumer theory. They reassert the rationality of the consumer. Completeness Here, the idea is that the consumer is able to rank any two bundles so that he chooses the one which provides him with most utility. That is, for any two bundles A and it is always possible to say either A B or A B. [...]
[...] Varian, Intermediate Microeconomics : A modern Approach, 6th edition, Norton The more the better The less the better û Á @ B Ò Ô ºÂæζž‰{jYjHjHjHjHjH7 hŠi®h'=\OJ[6]QJ[7]^J[8]mH sH ¹OJ[9]QJ[10]^J[11]mH sH hŠi®h+XOJ[12]QJ[13]^J[14]mH sH hŠi®h(JsOJ[15]QJ[16]^J[17]mH sH hŠi®OJ[18]QJ[19]^J[20]mH sH (hŠi®hŠi®CJ$OJ[21]QJ[22]^J[23]aJ$mH sH .hŠi®h(Js5?CJ0OJ[24]QJ[25]\?^J[26]aJ0mH sH .hŠi®hŠi®5?CJ0OJ[27]QJ[28]\?^J[29]aJ0mH sH .hŠi®hNegative slope of ICs resulting from monotonicity Moving on higher downward-sloping ICs (i.e. moving toward the preferred set) implies getting more of x and y whereas in the case of upward-sloping ICs, it requires to forgo some of x and/or some of y. [...]
[...] However, preferences as well as ICs can still be drawn assuming perfect knowledge: the consumer is expected to be able to choose a combination of the three goods (mobiles, landlines, and health). The actual choice ought to be analyzed through the expected utility theory, but what matters here is that the choice is possible: preferences are complete. Reflexivity is quite a trivial assumption. It can hardly be objected, as it would seem absolutely unintuitive and irrational for a consumer to say that he prefers, say, carrots to carrots. [...]
[...] Again, well-behaved indifference curves are expected to reflect general situations, and it is agreed that in some cases different assumptions might be made (e.g. bad, discrete goods, concave preferences, etc.). What is at stake here is not to oppose the neo-classical model with isolated examples, but to establish whether the general case is well described through well- behaved ICs. Completeness, reflexivity and transitivity Completeness seems to be a reasonable assumption: economists are not interested in totally irrelevant comparison. Thus, although it might be difficult for a consumer to rank his preferences when it comes to compare, for instance, houses with pencils, I believe the complete assumption still holds. [...]
[...] Thus it would never happen that a rational consumer chooses a set of goods over another on the basis of past/no longer accurate preferences. Are monotonicity, convexity and continuity reasonable assumptions? Continuity As evoked before, the main point of this assumption is not to take into account discontinuous/jumpy behaviour. Once again, it leads us back to the consumer's rationality. Indeed, it is expected from him that he prefers what provides him with the most utility. Someone who prefers what gives her less satisfaction is not a standard case, and shall not be analyzed through the usual preferences model. [...]
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