Asked by arielis reyes on May 20, 2024

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Rudolf Rational obeys the weak axiom of revealed preferences.His preferences don't change over time.One year he could afford bundle x but bought bundle y.If another year he buys bundle x, then he can't afford bundle y.

Weak Axiom

In the context of consumer choice theory, it is a postulate stating that if a consumer prefers bundle A over bundle B when both are affordable, then she will not choose B when A becomes more affordable.

Revealed Preferences

The theory that consumers' preferences can be determined by their purchasing habits and behavior rather than through their expressed desires or responses to surveys.

Preferences

The subjective tastes or desires of individuals or entities, which determine their choices among various options.

  • Acquire a deep understanding of the Weak Axiom of Revealed Preference (WARP) and its application to the study of consumer behavior.
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Alexandra HermanMay 21, 2024
Final Answer :
True
Explanation :
Rudolf Rational's behavior follows the weak axiom of revealed preferences, which means that if he chooses bundle y over bundle x in one period, it must mean that y is revealed to be at least as preferred as x. However, if in the next period he chooses bundle x over y, it must mean that x is now revealed to be at least as preferred as y. This is consistent with Rudolf's preferences not changing over time. Therefore, if he could afford x in one year and bought y instead, it implies that y was revealed to be at least as preferred as x in that year. If in another year he buys x instead of y, it must mean that x is now revealed to be at least as preferred as y and he can no longer afford y. Hence, the statement "If another year he buys bundle x, then he can't afford bundle y" is true.