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The document discusses consumer preference, defining it as the subjective choices individuals make when selecting goods or services, and outlines key consumer theories such as completeness, transitivity, non-satiation, convexity, and continuity. It also explains indifference curves, which graphically represent combinations of goods providing equal satisfaction, and describes different types of indifference curves, including convex, linear, and L-shaped. Additionally, it covers the Marginal Rate of Substitution (MRS), detailing how it measures the trade-off between goods while maintaining satisfaction, along with its associated axioms.

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Gerren Sibayan
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5 views2 pages

Wordie

The document discusses consumer preference, defining it as the subjective choices individuals make when selecting goods or services, and outlines key consumer theories such as completeness, transitivity, non-satiation, convexity, and continuity. It also explains indifference curves, which graphically represent combinations of goods providing equal satisfaction, and describes different types of indifference curves, including convex, linear, and L-shaped. Additionally, it covers the Marginal Rate of Substitution (MRS), detailing how it measures the trade-off between goods while maintaining satisfaction, along with its associated axioms.

Uploaded by

Gerren Sibayan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Name: John Carlo T.

Sibayan Subject: IMET

Section: AM1J Date: 02/15/24

1. What is consumer preference?

Consumer preference refers to the subjective choices and decisions made by individuals or
groups when selecting between different goods, services, or experiences. Consumer
preference also have consumer theory these are the following consumer theory:

- Completeness: This axiom assumes that consumers can compare and rank all possible
combinations of goods and services.

- Transitivity: This axiom assumes that if a consumer prefers option A to option B, and
prefers option B to option C, then the consumer will also prefer option A to option C.

- Non-satiation: This axiom assumes that more is always better than less.

- Convexity: This axiom assumes that consumers prefer a diverse range of goods and
services.

- Continuity: This axiom assumes that consumers’ preferences are continuous and can
change gradually rather than abruptly.

2. What is indifference curve?

An indifference curve is a graphical representation used in microeconomics to show different


combinations of two goods that provide a consumer with an equal level of satisfaction or
utility. These are the following axiom theory:

-Convex Indifference Curve: The convex shape of this curve reflects the axiom of diminishing
marginal rate of substitution, which states that as a consumer acquires more of one good,
they are willing to give up less of the other good to maintain the same level of satisfaction.

- Linear Indifference Curve: This type of curve represents constant marginal rate of
substitution, where the consumer is willing to trade a constant amount of one good for
another at every point on the curve.

- L-shaped Indifference Curve: This curve violates the axiom of transitivity, as it indicates
that the consumer is indifferent between different quantities of one good, regardless of the
quantity of the other good.

- Right-Angled Indifference Curve: This curve violates the axiom of non-satiation, suggesting
that the consumer is indifferent between bundles of goods even when one bundle contains
more of both goods.

- Perfect Substitutes Indifference Curve: In this case, the goods are perfect substitutes for
each other, leading to a linear indifference curve.
3. What is MRS?

MRS stands for Marginal Rate of Substitution. It is a concept used in economics to measure
how much of one good a consumer is willing to give up in exchange for an additional unit of
another good, while remaining on the same indifference curve (i.e., maintaining the same
level of satisfaction or utility).These are the following axiom theory of MRS:

-Non-Satiation: This axiom assumes that more is preferred to less.

:Diminishing Marginal Rate of Substitution (DMRS): According to this axiom, as a consumer


acquires more of one good while keeping the quantity of the other good constant, the
marginal rate of substitution between the two goods decreases.

- Transitivity: The transitivity axiom states that if a person prefers bundle A to bundle B, and
also prefers bundle B to bundle C, then they must prefer bundle A to bundle C.

- Continuity: Continuity requires that indifference curves be continuous and do not have any
gaps or jumps.

- Convexity: The convexity axiom assumes that the indifference curves are convex to the
origin.

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