Question

You attend an academic lecture on campus and the presenter is trying to analyze support for President Trump’s impeachment. They are using the results from a survey that asks respondents “on a scale from 1 – 10, how much do you support President Trump’s impeachment? 1 means that you would strongly disapprove of impeachment, and 10 means that you strongly support impeachment.” Because you are a budding economist, you care about revealed preferences and are inherently skeptical of the setup of this study. In order to capture revealed preference, suggest another statistic this researcher could use to analyze support for President Trump’s impeachment, why?

Answer 1

Samuelson's revealed preference theory is as simple as the choice of a consumer reveals his preference of one combination, which is considered as the best among all combinations or it is the cheapest one. here Samuelson considers the strong preference over other combinations. this concept was taken further with the logical theory of demand and called a "Direct Consistency test". here the assumptions are the same as demand theory with addition to consistency, transitivity, positive elasticity of demand. commodity X is measured on the X-axis and the commodity, money (which represents all other commodities) on the Y-axis. the triangle aoa (figure-1) represents consumer combination, the strong order A prefer above all other combinations. another price-income situation bb in which price of good X is different, while the income of the consumer may or may not be different. The various alternative combinations open to the consumer in the new situation are those lying within or on the triangle bob. Point B on the line bb represents the actually selected combination in this new situation. Similar kinds of preferences, as in situation A, will follow in situation B under strong and weak forms of preference hypothesis.

in both situations, the preferences by him in the two situations must be consistent with each other. The consumer’s behavior will be inconsistent if he reveals his preference for combination A over combination B in A situation, while in B situation he prefers combination B over combination when both the combinations A and B are available in both the situations.

various possible cases of consistency:

a) if one of the prefered points is not available within given region for example Bis available within A but A is not available in B.

b)if one of the two price -income lines lies on the other then it will interact with each other.

i) when they cross and position of both A& B is right, then prefer B

ii)when they cross and position of both A& B are left, then prefer B.

iii) when none of the points are on the cross A left B  right. so both are consistent at their position.

IV) when none of the points are on the cross A right B left. so both are inconsistent and chose one on other in teir respective position.

c)  special cases when the two price-income lines intersect each other, but one of the two choice positions lies at the cross while the other chosen position may lie either outside or inside the cross.

i) if A is on cross and B is outside then it will be better to prefer.

ii) if A is on cross and B is inside then prefer A over B for consistency.

cSo The Direct consistency test is more appropriate and applicable to justify the survey on Trump's impeachment. so it gives a more logical approach over the scale analysis.