Evaluating a Simplifying Assumption in a Consumer Choice Model
An economist is building a model to predict a typical consumer's purchasing decisions between two goods. To ensure the model yields a single, predictable outcome, the economist assumes that the consumer's preferences are 'convex'. In economic terms, this means the consumer is assumed to always prefer a mix of the two goods over having a lot of one and none of the other.
Critically evaluate the use of this 'convex preferences' assumption. In your response, you should:
- Explain the primary benefit of making this assumption from a modeling perspective.
- Provide and justify a real-world example where this assumption is plausible and another real-world example where it would likely be an inaccurate representation of consumer behavior.
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Social Science
Empirical Science
Science
Economy
CORE Econ
Economics
Introduction to Microeconomics Course
The Economy 2.0 Microeconomics @ CORE Econ
Ch.7 The firm and its customers - The Economy 2.0 Microeconomics @ CORE Econ
Evaluation in Bloom's Taxonomy
Cognitive Psychology
Psychology
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