Question

Problem 2 1. Bob consumes two types of goods. He thinks that a consumption bundle (xı, x2) is at least as good as a bundle (yı, y2) if and only if x1 2 y and x2 2 y2. Are his weak preferences complete? Reflexive? Transitive? 2. Randy hates studying both economics and history. The more time he spends studying either subject, the less happy he is. But Randy has strictly convex preferences. (a) Sketch an indifference curve for Randy where the two commodities are hours per week spent studying economics and hours per week spent studying history. Will the slope of an indifference curve be positive or negative? (b) Do Randy's indifference curves get steeper or flatter as you move from left to right along one of them?

Answer 1

Answer 1 :-

Let there be a set of options amongst which an agent is choosing. The options can be stocks, portfolio etc In the above equation the agent has weak preference relation among all the options. The interpretation of this relation can be done in the following

1) x12 y1 means that the agent prefers x at least as much as y 2) That the agent likes x1 strictly better than y1 or is indifferent between them 3) That the agent would trade y for x

The weak preference relation is established in the above case on the basis of choice reveals preference of the agent The weak preference relation has the following properties 1) TOTALITY For all options of x and y either x2y or y x.

2) REFLEXIVITY: For all options of x, x 2x 3) TRANSITIVITY This means that x 2 y and y2 z then automatically xzz for all options of x y and z

Answer 2 :-

LIL2 エC IC4 HISTORY ECONOMICS

If a commodity is bad for a consumer , the more units of the commodity , the more it will lower the satisfaction .

The property of the indifference curve will be :-

1) It will be convex to the origin .

2) The indifference curve will be sloping upward that is positively sloped because movement towards the right along an indifference curve implies more of economics reducing the customer satisfaction , thus to keep the level of satisfaction constant the history has to be increased .

3) The direction of preference in this case is upward and to the left

4) The indifference curve will be flatter on the sides and steeper in the middle.