Question

For each statement, say which assumption of well-behaved preferences is violated, if any:

a. I can't decide whether I'd rather go to the bar or for a bike ride.

b. I could eat pizza forever.

c. After I've had three cups of co ee, I don't want any more.

d. If you give me a pair of socks, I'll give you $200.

Please explain

Answer 1

a) Violates the assumption of Completeness

CompleteFor any two bundles x and y it is always possible to make the it is always possible to make the statement that either consumer prefers either x to y or y to x or consumer is indifferent between x and y.

Here the individual does not prefer any of the three outcomes and is neither indifferent between them.

b) Does not violate any assumptions

c) Violates assumption of non-satiety. Indifference curve theory assumes that the consumer has not reached the point of satiety.

d) Does not violate any assumptions.