Adyanced econonics (lecture 4: consumption theory I) e Jianliang lecture for Chu Kechen Honors College
lecture4 for Chu Kechen Honors College Advanced Economics (lecture 4: consumption theory I) Ye Jianliang
Preference and choice Content Preference and rationality The rule of choice Budget Demand function WAand demanded law lecture for Chu Kechen Honors College
lecture4 for Chu Kechen Honors College Preference and Choice ➢ Content: ⚫ Preference and rationality ⚫ The rule of choice ⚫ Budget ⚫ Demand function ⚫ WA and demanded law
1. Preference An(acceptable) alternatives set (or a consumption set)XCR ° A(weak) preference relation“% a binary relationship on X, for any x,ye X, x%ymeans x is at least as good as y A strict preference xxyex% y, but not y %x 。 An indifference relation“~” x>y分>x%y,andy%x lecture for Chu Kechen Honors College
lecture4 for Chu Kechen Honors College 1.Preference ➢ An (acceptable) alternatives set (or a consumption set ) ⚫ A (weak) preference relation“ ”: a binary relationship on X, for any , means” x is at least as good as y”. ⚫ A strict preference “ ”: ⚫ An indifference relation “ ”: k X + % x y, X x y % x y x y y x % % ,but not x y x y y x % % ,and
1. Preference Definition: preference on x is rational if It's complete x,yEX, either x y or y% x, or both It's reflexive WxEX. x%x Its transitive x,y,EX, if x y and y% z, the en x 0 lecture for Chu Kechen Honors College
lecture4 for Chu Kechen Honors College 1.Preference ➢ Definition: preference on X is rational if: ⚫ It’s complete: ⚫ It’s reflexive: ⚫ It’s transitive: % x y x y y x , ,either or , or both X % % x x x X, % x y z x y y z x z , , ,if and , then X % % %
1. Preference Propersition1: if 9 is rational, then x is irreflexive and transitive c is reflexive and transitive and symmetric 。fx>y%z, then x>z lecture for Chu Kechen Honors College
lecture4 for Chu Kechen Honors College 1.Preference ➢ Propersition1: if is rational, then: ⚫ is irreflexive and transitive ⚫ is reflexive and transitive and symmetric ⚫ If % , then x y z x z %