GENERAL KNOWLEDGE

Detailed explanation-1: -Revealed preference, a theory offered by American economist Paul Anthony Samuelson in 1938, states that consumer behavior, if their income and the item’s price are held constant, is the best indicator of their preferences. Revealed preference theory works on the assumption that consumers are rational.

Detailed explanation-2: -The revealed-preferences method involves determining the value that consumers hold for an environmental good by observing their purchase of goods in the market that directly (or indirectly) relate to environmental quality.

Detailed explanation-3: -Revealed preference models assume that the preferences of consumers can be revealed by their purchasing habits. Revealed preference theory arose because existing theories of consumer demand were based on a diminishing marginal rate of substitution (MRS).