Question
Maria's consumers behavior was observed in three situations with different prices and incomes. In situation 1, she chose a bundle that cost $1,600. In situation
Maria's consumers behavior was observed in three situations with different prices and incomes. In situation 1, she chose a bundle that cost $1,600. In situation 2, she chose a bundle that cost $2,500. In situation 3, she chose a bundle that cost $3,100. The bundle purchased in situation 2 would cost $1,200 at situation 1 prices. The bundle purchased in situation 3 cost $2,000 at situation 2 prices. Maria's consumers behavior is known to satisfy the strong axiom of revealed preference. Therefore, the bundle purchased in situation. Please explain the reasoning behind your answer on Maria's preferences from above.
a 1 must cost less than $3,100 at situation 3 prices. |
b 3 must cost at least $3,100 at situation 1 prices. |
c 1 can not cost less than $3,100 at situation 3 prices. |
d 2 must cost at least $3,100 at situation 1 prices. |
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