Charlotte consumes two goods, 1 and 2. In order to model her preferences, she was critically observed in two periods and the following aberrations were made: with an income of GH¢100 she buys 5 units of good 1 at a price of GH¢10 per unit and 10 units of good 2 at a price of GH¢5 per unit. With an income of GH¢175 she buys 3 units of good 1 at a price of GH¢15 per unit and 13 units of good 2 at a price of GH¢10 per unit. Explain thoroughly if the actions of Charlotte conform to the basic axioms of consumer behaviour or not. (hint: WARP).

Charlotte consumes two goods, 1 and 2. In order to model her preferences, she was critically observed in two periods and the following aberrations were made: with an income of GH¢100 she buys 5 units of good 1 at a price of GH¢10 per unit and 10 units of good 2 at a price of GH¢5 per unit. With an income of GH¢175 she buys 3 units of good 1 at a price of GH¢15 per unit and 13 units of good 2 at a price of GH¢10 per unit. Explain thoroughly if the actions of Charlotte conform to the basic axioms of consumer behaviour or not. (hint: WARP).

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter4: Utility Maximization And Choice

Section: Chapter Questions

Problem 4.2P

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