Question
Suppose a consumer values two goods, movies and cakes, like Julia from the textbook. The consumer can choose between four bundles: A consisting of 3
Suppose a consumer values two goods, movies and cakes, like Julia from the textbook. The consumer can choose between four bundles: A consisting of 3 cakes and 3 movies, B consisting of 6 cakes and 6 movies, C consisting of 10 cakes and 2 movies, and D consisting of 2 cakes and 10 movies. Write down a utility function that is consistent with the axioms of rational preferences and also consistent with B A, C B, D B, and C D. While consistent with the axioms of rational preferences, this utility function is problematic from the point of view of microeconomic theory. Why?
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