Question

1. Once a week Jenny goes out and eats at a cafeteria that offers 2 choices of weekly specials. This week Jenny chooses to eat the salad over the pasta dish. The next week, the cafeteria offers tacos and salad, Jenny chooses to eat tacos. The following week after that, the cafeteria offers pasta and taco’s, Jenny decides to eat pasta. Assuming Jenny is not indifferent between any of the entree choices, decide which, if any, of the assumptions of consumer preferences are violated.

Answer 1

Consumer Preferences allow a consumer to rank different bundles of goods as per the utility, or total level of satisfaction of consuming a good or service.

There are three different assumptions of consumer preference :

Completeness : It happens when the consumer doesnt have indifference between two goods. It means that the consumer prefers one good over the other.

This assumption is violated as in one case, Jenny prefers saald over the pasta dish whereas in other case she prefers pasta over the taco's.

Transitivity : Defining a relationship between the goods. If a consumer prefers Good A to Good B and Good B to Good C, he would prefer Good A to Good C.

This assumption is violated, as Jenny prefers salad over pasta dish and tacos over salad. When it comes to pastas and taco's ,Jenny likes pasta over the taco's.

Satiation : It states that more of a good is always better, as long as consumer is able to consume. 2units of Taco's are always better than 1unit of Taco's.

This assumption is not applicable in this case.