For each of the following demand functions, check whether they satisfy the weak axiom of revealed...
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For each of the following demand functions, check whether they satisfy the weak axiom of revealed preferences (WARP) (a) "Random Demand". For any pair of prices p₁ and p2 and income m, the consumer randomizes uniformly over all points in the budget line. Use a diagram to complement your answer. (b) "Average demand". Suppose that the consumer always selects the midpoint of the budget line (5m, 5m P1 P2 use diagrams to support your answer. Use the following information to answer parts c and d. The budget of a given consumer is entirely spent on Good 1 and Good 2, during the months of September and October. P1 P1 G₁ G₂ Please Sept. Oct. $3 $8 $4 $6 4 3 3 4 c. Determine if his consumption bundle in October is affordable in September. Also determine if his consumption bundle in September is affordable in October. d. Based on your answer to part c, determine if the consumer's behavior is consistent with WARP. For each of the following demand functions, check whether they satisfy the weak axiom of revealed preferences (WARP) (a) "Random Demand". For any pair of prices p₁ and p2 and income m, the consumer randomizes uniformly over all points in the budget line. Use a diagram to complement your answer. (b) "Average demand". Suppose that the consumer always selects the midpoint of the budget line (5m, 5m P1 P2 use diagrams to support your answer. Use the following information to answer parts c and d. The budget of a given consumer is entirely spent on Good 1 and Good 2, during the months of September and October. P1 P1 G₁ G₂ Please Sept. Oct. $3 $8 $4 $6 4 3 3 4 c. Determine if his consumption bundle in October is affordable in September. Also determine if his consumption bundle in September is affordable in October. d. Based on your answer to part c, determine if the consumer's behavior is consistent with WARP.
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Related Book For
Business Statistics A Decision Making Approach
ISBN: 9780133021844
9th Edition
Authors: David F. Groebner, Patrick W. Shannon, Phillip C. Fry
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