Adyanced econonics (lecture 5: consumption theory I) e 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 lecture 5 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(acceptable) alternatives set (or a consumption set)XCR ° A(weak) preference relation“% a binary relationship on X, for any x,ye X, x%ymeans x is at least as good as y A strict preference> xxyex% y, but not y %x 。 An indifference relation“~” x>y分>x%y,andy%x lecture 5 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 It's complete x,yEX, either x y or y% x, or both It's reflexive WxEX. x%x Its transitive x,y,EX, if x y and y% z, the en x 0 lecture 5 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 9 is rational, then x is irreflexive and transitive c is reflexive and transitive and symmetric 。fx>y%z, then x>z lecture 5 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 %