ECONOMICS
CONSUMERS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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means that a consumer will spend her entire income.
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is unnecessary, as long as transitivity is assumed.
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recognizes that there may be pairs of market baskets that cannot be compared.
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means that the consumer can compare any two market baskets of goods and determine that either one is preferred to the other or that she is indifferent between them.
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Detailed explanation-1: -Completeness. The completeness assumption states that consumers are rational and make decisions based on all the information they have. This assumption is made because consumers control their own preferences and are not influenced by external factors.
Detailed explanation-2: -What does the assumption that preferences are complete mean about the consumer’s ability to rank any two baskets? By requiring preferences to be complete, economists are ensuring that consumers will not respond indecisively when asked to compare two baskets.
Detailed explanation-3: -The assumption of completeness simply means that it is assumed that a consumer is able to rank all possible combinations (or bundles) of goods and services in order of preference.
Detailed explanation-4: -Revealed preference theory works on the assumption that consumers are rational. In other words, they will have considered a set of alternatives before making a purchasing decision that is best for them. Thus, given that a consumer chooses one option out of the set, this option must be the preferred option.