Question

Here is a table of prices and the demands of a consumer named Ram whose behavior was observed in 5 different price-income situations. Situation P1 P2 X1 X2 A 1 1 5 35 B 1 2 35 10 C 1 1 10 15 D 3 1 5 15 E 1 2 10 10 Is Ram’s behavior consistent with the Weak Axiom of Revealed Preference ?

Answer 1

Answer:

The WRAP condition is not violated because the behavior of consumer is consistent.

In the given table, all the red numbers shows unaffordable bundles.

The number on which there is circle are the bundles are actually bought.

The number which there is a star over them are affordable but not chooses.

When prices are (1,1), A is chooses when bundle C, D and E are affordable, it means A is preferred to C, D, and E

When prices are (1,2), B is chooses when bundle C, D and E are affordable, it means B is preferred to C, D, and E

When prices are (1,1), C is chooses when bundle D and E are affordable, it means C is preferred to C, D, and E

When prices are (3,1), D is chooses when all other bundles are unaffordable.

When prices are (1,2), E is chooses when all other bundles are unaffordable.