Critiquing Preference Consistency
An individual is describing their preferences for combinations of 'daily consumption' and 'daily non-working time'. They make the following statement: 'I am equally satisfied with two different scenarios: Scenario A, which is 15 hours of non-working time and $200 of consumption, and Scenario B, which is 16 hours of non-working time and $180 of consumption. I am also equally satisfied with Scenario A and a third option, Scenario C, which is 15 hours of non-working time and $250 of consumption.'
Using the standard principles of how preferences are represented graphically by indifference curves, critique the logical consistency of this individual's complete statement. Explain your reasoning.
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Sociology
Social Science
Empirical Science
Science
Economics
Economy
CORE Econ
Introduction to Microeconomics Course
Related
Consider a model of an individual's choice between consumption and leisure (non-working time). The individual's preferences are represented by a set of standard, convex indifference curves on a graph where the horizontal axis is 'non-working hours per day' and the vertical axis is 'consumption ($)'. Suppose that Point X (16 non-working hours, $450 consumption) and Point Y (17 non-working hours, $400 consumption) both lie on the same indifference curve. Now consider a third point, Point Z (17 non-working hours, $450 consumption). Based on the properties of indifference curves, which of the following statements correctly describes the individual's preferences?
Interpreting the Shape of Indifference Curves
In a model representing an individual's choices between different combinations of 'daily consumption' and 'daily non-working hours', their preferences are illustrated by indifference curves. Match each geometric property of these curves with its correct economic interpretation.
Critiquing Preference Consistency
Analyzing Stated Preferences
In a standard model of choice between consumption and non-working time, it is possible for two of an individual's indifference curves to cross at a single point, as long as one curve is steeper than the other at the point of intersection.
In a standard economic model, an individual's preferences for different combinations of daily consumption and non-working time are represented by downward-sloping, convex indifference curves, where higher curves represent greater satisfaction. Suppose this individual is indifferent between combination P (15 hours of non-working time, $300 of consumption) and combination Q (17 hours of non-working time, $240 of consumption). Given this information, which of the following combinations would this individual definitively prefer over both P and Q?
Economic Meaning of Convex Preferences
In a model where an individual chooses between combinations of consumption and non-working time, preferences are typically represented by curves that are convex (bowed inward toward the origin). If an individual’s preference curves were instead straight, downward-sloping lines, this would imply that the amount of consumption they are willing to trade for an additional hour of non-working time is __________ regardless of how much non-working time they currently have.
Evaluating Preference Consistency