Question

The following table lists prices faced and quantities chosen of three commodities in three different situations (over which the consumer's preferences are invariant). Is it possible to provide an unambiguous ranking of the consumer's utility in the three situations?

situation	P1	P2	P3	X1	X2	X3
1	1	2	3	3	5	3
2	2	1	3	2	8	5
3	1	1	4	4	7	3

Answer 1

For the given 3 situations we need to find the total cost or expenditure that the consumer had incurred in all 3 goods in each situtaion

in situation one

p1x1+ p2x2+p3x3

= 3*1+2*5+3*3

= 3+10+9 = 22

in situation 2

p1x1+ p2x2+p3x3

= 2*2+1*8+3*5

= 4+8+15

=27

in situation 3

p1x1+ p2x2+p3x3

=1*4+1*7+4*3

= 4+7+12

= 23

so after looking the costs incurred on these goods over the 3 sitautions we come to the conclusion that in situation 2 the cosnumer spends the maximum amount followed by in period 3 and the the least cost in period 1

expemditure is maximum at 2 , then at 3 and minimum at 1

so utility can have unambigious ranking given the expenditure