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Chapter 6: Problem 9

Which of the following descriptions of consumer behavior violates the assumption of rational preferences? Explain briefly. a. Joseph is confused: He doesn't know whether he'd prefer to take a job now or go to college full-time. b. Brenda likes mustard on her pasta, in spite of the fact that pasta is not meant to be eaten with mustard. c. Brewster says, "I'd rather see an action movie than a romantic comedy, and I'd rather see a romantic comedy than a foreign film. But given the choice, I think I'd rather see a foreign film than an action movie."

Short Answer

Expert verified
Only statement c with Brewster's movie preferences violates the assumption of rational preferences, due to the lack of transitivity in his preferences.

Step by step solution

01

Analyze statement a

Joseph is essentially confused in making a decision between taking a job now or pursuing a full-time college education. This is not necessarily a violation of the rational preference assumption because it is natural for people to have indecision over important choices. It does not mean his preferences are not ordered or logical.
02

Analyze statement b

Brenda prefers mustard on her pasta, contrary to the societal norm. But an individual's preferences are subjective, and her culinary choice does not violate the assumption of rational behavior. Brenda has a clear preference for the choice that satisfies her taste, which observes rational behavior's characteristics.
03

Analyze statement c

Brewster's preferences for movies are not in a logical order. His preference for romantic comedies over action movies and foreign films contradicts his preference for a foreign film over an action movie. This violates the assumption of transitivity in rational behavior, which states that if a person prefers A over B and B over C, they should prefer A over C.

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Most popular questions from this chapter

Larsen E. Pulp, head of Pulp Fiction Publishing Co., just got some bad news: The price of paper, the company's most important input, has increased. a. On a supply/demand diagram, show what will happen to the price of Pulp's output (novels). b. Explain the resulting substitution and income effects for a typical Pulp customer. For each effect, will the customer's quantity demanded increase or decrease? Be sure to state any assumptions you are making.

[Uses the Indifference Curve Approach] a. Draw a budget line for Rafaella, who has a weekly income of \(\$ 30 .\) Assume that she buys chicken and eggs, and that chicken costs \(\$ 5\) per pound while eggs cost \(\$ 1\) each. Add an indifference curve for Rafaella that is tangent to her budget line at the combination of 4 pounds of chicken and 10 eggs. b. Draw a new budget line for Rafaella, if the price of chicken falls to \(\$ 3\) per pound. Assume that Rafaella views chicken and eggs as substitutes. What will happen to her chicken consumption? What will happen to her egg consumption?

When an economy is experiencing inflation, the prices of most goods and services are rising but at different rates. Imagine a simpler inflationary situation in which all prices, and all wages and incomes, are rising at the same rate, say 5 percent per year. What would happen to consumer choices in such a situation? (Hint: Think about what would happen to the budget line.)

[Uses the Marginal Utility Approach] Now go back to the original assumptions of problem 1 (novels cost \(\$ 8,\) CDs cost \(\$ 6,\) and income is \(\$ 120\) ). Suppose that Parvez is spending \(\$ 120\) monthly on paperback novels and used CDs. For novels, \(M U / P=5 ;\) for CDs, \(M U / P=4 .\) Is he maximizing his utility? If not, should he consume (1) more novels and fewer CDs or (2) more CDs and fewer novels? Explain briefly.

[Uses the Indifference Curve Approach] With the quantity of popcorn on the vertical axis and the quantity of ice cream on the horizontal axis, draw indifference maps to illustrate each of the following situations. (Hint: Each will look different from the indifference maps in the appendix, because each violates one of the assumptions we made there.) a. Larry's marginal rate of substitution between ice cream and popcorn remains constant, no matter how much of each good he consumes. b. Heather loves ice cream but hates popcorn.
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