Adyanced economics (lecture 5: consumption theory D) Ye Jianliang lecture 5 for Chu Kechen Honors college
lecture5 for Chu Kechen Honors College Advanced Economics (lecture 5: consumption theory I) Ye Jianliang
Preference and choice Content Preference and rationality The rule of choice Budget Demand function 。 WAand demanded law lectures for Chu Kechen Honors College
lecture5 for Chu Kechen Honors College Preference and Choice ➢ Content: ⚫ Preference and rationality ⚫ The rule of choice ⚫ Budget ⚫ Demand function ⚫ WA and demanded law
1. Preference An (acceptablealternatives set (or a consumption set)Xc界 A(weak) preference relation"%: a binary relationship on x, for any x,yEX, x% ymeans x is at least as good as y A strict preference“x xxyex% y, but not y %x 。 An indifference relation“~ xxyex% y, and y %x lectures for Chu Kechen Honors College
lecture5 for Chu Kechen Honors College 1.Preference ➢ An (acceptable) alternatives set (or a consumption set ) ⚫ A (weak) preference relation“ ”: a binary relationship on X, for any , means” x is at least as good as y”. ⚫ A strict preference “ ”: ⚫ An indifference relation “ ”: k X + % x y, X x y % x y x y y x % % ,but not x y x y y x % % ,and
1. Preference Definition: preference on X is rational if Its complete x,yEX, either x% y or y %x, or both o It's reflexive WxEX.x% x Its transitive x,y,zEX, if x% y and y% z, then x%z lectures for Chu Kechen Honors College
lecture5 for Chu Kechen Honors College 1.Preference ➢ Definition: preference on X is rational if: ⚫ It’s complete: ⚫ It’s reflexive: ⚫ It’s transitive: % x y x y y x , ,either or , or both X % % x x x X, % x y z x y y z x z , , ,if and , then X % % %
1. Preference >Propersition1: if is rational, then >is irreflexive and transitive is reflexive and transitive and symmetric If xsy%z,then x>z lectures for Chu Kechen Honors College
lecture5 for Chu Kechen Honors College 1.Preference ➢ Propersition1: if is rational, then: ⚫ is irreflexive and transitive ⚫ is reflexive and transitive and symmetric ⚫ If % , then x y z x z %