Question 1 Three friends, Alice, Bob and Carol, have the following individual preferences over the food they usually get: Chinese, Indian and Italian. Alice Bob Carol Most preferred Chinese Italian Indian Indian Chinese Italian Least preferred Italian Indian Chinese Jointly, they agree to determine their group preference as follows: Cuisine A is preferred to B if A gets the majority of votes against B in a two-alternative vote. • What is the group’s preference over Chinese and Indian food? • What is the group’s preference over Indian and Italian food? • What is the group’s preference over Chinese and Italian food? • Is the group’s preference over the three cuisines transitive? Why or why not? Question 2 In a discussion of tuition rates, a university official argues that the demand for admission is completely price inelastic. As evidence, she notes that while the university has doubled its tuition (in real terms) over the past 15 years, neither the number nor quality of students applying has decreased. Would you accept this argument? Explain briefly. (Hint 1: The official makes an assertion about the demand for admission, but does she actually observe a demand curve? What else could be going on? Hint 2: Think about the existence of potential substitutes.) Question 3 Suppose there are only two goods: Beer and Milk. Tom’s preference over bundles of beer and milk is as follows: For any two bundles A = (bA, mA) and B = (bB, mB) (where b and m denotes the amount of beer and milk, respectively), A ≿ B (i.e., “A is at least as good as B”) if and only if: Either bA > bB; Or bA = bB and mA ≥ mB. In other words, Tom cares, first and foremost, about the amount of beer, but if the two bundles contain the same amount of beer, then he prefers having more milk to less. • Is Tom’s preference complete? If yes, show why; if no, give an example of two bundles between which Tom cannot compare. • Is Tom’s preference monotone? Strongly monotone? • Does Tom’s preference comply with the property of diminishing marginal rate of substitution?
Question
Question 1 Three friends, Alice, Bob and Carol, have the following individual preferences over the food they usually get: Chinese, Indian and Italian. Alice Bob Carol Most preferred Chinese Italian Indian Indian Chinese Italian Least preferred Italian Indian Chinese Jointly, they agree to determine their group preference as follows: Cuisine A is preferred to B if A gets the majority of votes against B in a two-alternative vote. • What is the group’s preference over Chinese and Indian food? • What is the group’s preference over Indian and Italian food? • What is the group’s preference over Chinese and Italian food? • Is the group’s preference over the three cuisines transitive? Why or why not? Question 2 In a discussion of tuition rates, a university official argues that the demand for admission is completely price inelastic. As evidence, she notes that while the university has doubled its tuition (in real terms) over the past 15 years, neither the number nor quality of students applying has decreased. Would you accept this argument? Explain briefly. (Hint 1: The official makes an assertion about the demand for admission, but does she actually observe a demand curve? What else could be going on? Hint 2: Think about the existence of potential substitutes.) Question 3 Suppose there are only two goods: Beer and Milk. Tom’s preference over bundles of beer and milk is as follows: For any two bundles A = (bA, mA) and B = (bB, mB) (where b and m denotes the amount of beer and milk, respectively), A ≿ B (i.e., “A is at least as good as B”) if and only if: Either bA > bB; Or bA = bB and mA ≥ mB. In other words, Tom cares, first and foremost, about the amount of beer, but if the two bundles contain the same amount of beer, then he prefers having more milk to less. • Is Tom’s preference complete? If yes, show why; if no, give an example of two bundles between which Tom cannot compare. • Is Tom’s preference monotone? Strongly monotone? • Does Tom’s preference comply with the property of diminishing marginal rate of substitution?
Solution
Sure, here are the answers to your questions:
Question 1:
- The group's preference over Chinese and Indian food: Alice and Bob prefer Chinese over Indian, so the group's preference is Chinese.
- The group's preference over Indian and Italian food: Alice and Carol prefer Indian over Italian, so the group's preference is Indian.
- The group's preference over Chinese and Italian food: Bob and Carol prefer Italian over Chinese, so the group's preference is Italian.
- The group's preference over the three cuisines is not transitive. This is because while Chinese is preferred over Indian, and Indian is preferred over Italian, Italian is preferred over Chinese, which contradicts the transitivity.
Question 2: The university official's argument that the demand for admission is completely price inelastic may not be entirely accurate. While it's true that the number and quality of students applying has not decreased despite the increase in tuition, this does not necessarily mean that the demand is price inelastic. There could be other factors at play, such as the lack of substitutes (other universities may also have increased their tuition), or the perceived value of the university's education may have increased over time.
Question 3:
- Tom's preference is complete because for any two bundles A and B, he can always make a comparison based on the amount of beer and, if necessary, the amount of milk.
- Tom's preference is monotone because more is always better for him. It's strongly monotone because he prefers more of both goods.
- Tom's preference does not comply with the property of diminishing marginal rate of substitution. This is because he always prefers more beer to less, regardless of the amount of milk, which means that he is not willing to substitute milk for beer at a decreasing rate.
Similar Questions
Four friends decide to meet at a Chinese restaurant for dinner. They decide that each person will order an item off the menu, and they will share all dishes. They will split the cost of the final bill evenly among each of the people at the table. A Tragedy of the Commons problem is likely for each of the following reasons exceptGroup of answer choiceseach dish would be both excludable and rival in consumption.when one person eats, they may not take into account how their choice affects their friends.there is an externality associated with eating the food on the table.each person has an incentive to eat as much as possible since their individual rate of consumption will not affect their individual cost.
Which of the following statements described preference theory?
Question 9 of 30Which of the following most likely influences your food choices?A.Restaurant ownersB.PeersC.NeighborsD.Supermarket managersSUBMITarrow_backPREVIOUS
Suppose the tastes of a consumer are described by the utility function . Consider bundles A=(1,16) and B=(16,1). Which of the following statements best describes the consumer’s preferences over bundles A and B?Group of answer choicesThe consumer strictly prefers A to BThe consumer strictly prefers B to AThe consumer is indifferent between A and BFor the consumer, A is at least as good as BFor the consumer, B is at least as good as A
2. "Most preferred food" Survey (percentages)The column 'Males & Females' refers to the percentage of males and females preferring a certain type of food.For which type of food do females' and males' preferences differ the most?A. SaladB. HamburgerC. SteakD. CheeseE. Chocolate
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.