T1.1 - Consumer objectives, preferences and utility

What are the components of the consistent choice model?

Consumption set, preference ordering, constraint, welfare maximisation

What is a weak preference relation?

A binary relation where one bundle is at least as good as another

What conditions define rational preferences?

Completeness and transitivity

What does local non satiation imply?

There is always a nearby bundle that strictly better

Which implication chain relates to the desirability assumptions?

Strong monotonicIty implies monotonicity implies local non-satiation

What do convex preferences imply?

Averages are at least as good as extreme

What is the difference between convex and strictly convex preferences?

Strict convexity implies strict preferences for averages over extremes

What does the utility function represent?

An ordinal ranking of preferences

What is MRS?

The right at which a consumer is willing to trade one good for another

Why is utility ordinal not cardinal?

Because preference ranking matters not the exact numerical value

What does Walras’ Law state?

If all agents exhaust budget total access demand equals zero

What is the modal benefit in terms of utility?

MB = MU of the good / MU of money income (i.e. a special case of MRS)