Preference and Choice Lecture

These flashcards cover key concepts and terms related to preference and choice from the economics lecture notes.

Indifference

A state where a consumer has no preference between two or more items.

Transitivity

The logical rule that if A is preferred to B, and B is preferred to C, then A must be preferred to C.

Condorcet Paradox

A situation in collective decision-making where preferences are intransitive.

Utility Function

A mathematical representation that assigns a numerical value to each element in a set based on individual preferences.

Ordinal Properties

Properties of a utility function that do not rely on the specific numerical differences in utility, only on the rankings.

Cardinal Properties

Properties of a utility function that are sensitive to the specific numerical differences between utility measures.

Weak Axiom of Revealed Preference

An assumption that a consumer's observed choices will be consistent with their preferences.

Revealed Preference Relation

A relation that captures a decision's preferences based on observed choices.

Rationality

The assumption that consumers have consistent preferences and make choices that maximize their utility.

Walrasian Budget Set

The set of all feasible consumption bundles for a consumer given market prices and wealth.

Giffen Good

A type of inferior good for which demand increases as its price increases, contradicting typical demand behavior.

Engel Curve

A curve that shows how a consumer's expenditure on a good varies with income.

Comparative Statics

The analysis of how changes in economic parameters affect consumption choices.