Consumer theory - preferences and utility

Question 1

What are the three axioms of consumer choice?

Answer 1

• Completeness
• Transitivity
• Non satiation

Question 2

What is completeness (axiom)?

Answer 2

Consumers possess preference over all possible bundles

Question 3

What is transitivity (axiom)?

Answer 3

Preferences are complete and logical

Question 4

What is Non satiation (axiom)?

Answer 4

Any marginal increase in quantity will cause an increase in utility for the customer

Question 5

What are indifference maps?

Answer 5

A way of thinking about the choice between two goods

Question 6

What are the properties of indifference curves?

Answer 6

• Utility is increasing in the distance from the origin
• An indifference curve passes through every possible bundle
• IC’s cannot have a positive gradient
• IC’s are convex to the origin