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Weak Monotonicity
If an entire bundle x is greater than y, you will prefer x automatically
Strong Monotonicity
If only a part of bundle x is greater than y, you will prefer x automatically
Convexity
If the IC is linear, (“Average is preferred to extremes”)
Strong Convexity
IC is non-linear and tangent to budget line
Continuity
If you prefer A to B, you will also prefer points closer to A to B
Transitivity
Weak bundle preferences are not recycled, a>b and b>c means a>c, (Being able to logically organize preferences)
Completeness
Being able to decide whether you are indifferent or strictly prefer a bundle.
Reflexivity
You are indifferent when comparing a package to itself
Well behaved preferences
convexity and monotonicity
Rational preferences
Completeness and transitivity
What does a convex-leaning consumer prefer?
To consume the goods together
What does a concave-leaning consumer prefer?
To consume the goods separately
Indifference Curve
Bundles with the same utility
Perfect Substitute def
When substitution happens at a constant rate
What does the graph of perfect substitutes look like?
Linear
What does the graph of perfect complements look like?
L shaped
Perfect Complements def
The consumer becomes indifferent to the bundles if the complement ratio is not followed
MRS
The rate at which a consumer is willing to substitute one good for another, marginal willingness to pay
Note
Flashcard