Asked by durk
Which of the following is a key assumption of consumer choice theory?
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GPT-5 mini
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The central assumption is that consumers are rational and choose the bundle of goods that maximizes their utility subject to their budget constraint (given prices and income).
Other standard assumptions used in consumer‑choice theory:
- Completeness: consumers can rank any two bundles (A ≽ B or B ≽ A).
- Transitivity: if A ≽ B and B ≽ C then A ≽ C.
- Non‑satiation (more is better): more of a good is at least not worse.
- Convexity/diminishing marginal rate of substitution: mixtures are preferred to extremes (declining MRS).
- Well‑behaved, stable preferences and full information about prices.
If you give the multiple‑choice options, I can point to which one matches these assumptions.
Other standard assumptions used in consumer‑choice theory:
- Completeness: consumers can rank any two bundles (A ≽ B or B ≽ A).
- Transitivity: if A ≽ B and B ≽ C then A ≽ C.
- Non‑satiation (more is better): more of a good is at least not worse.
- Convexity/diminishing marginal rate of substitution: mixtures are preferred to extremes (declining MRS).
- Well‑behaved, stable preferences and full information about prices.
If you give the multiple‑choice options, I can point to which one matches these assumptions.
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