Given below are two statements: Statement I: Let be the chosen bundle when prices are and let is some other bundle such that . Then if the consumer is choosing the most preferred bundle she can afford, we must have . Statement II: If one bundle is chosen when another could have been chosen, we can say that the first bundle is revealed preferred to the second. In the light of the above statements, choose the correct answer from the options given below:
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Given below are two statements: Statement I: Let (x₁, x₂) be the chosen bundle when prices are (p₁, p₂) and let (y₁, y₂) is some other bundle such that p₁x₁ + p₂x₂ ≥ p₁y₁ + p₂y₂. Then if the consumer is choosing the most preferred bundle she can afford, we must have (x₁, x₂) > (y₁, y₂). Statement II: If one bundle is chosen when another could have been chosen, we can say that the first bundle is revealed preferred to the second. In the light of the above statements, choose the correct answer from the options given below: (A) Both Statement I and Statement II are true (B) Both Statement I and Statement II are false (C) Statement I is true but Statement II is false (D) Statement I is false but Statement II is true
Also written as: Given below are two statements: Statement I: Let (x_1, x_2) be the chosen bundle when prices are (p_1, p_2) and let (y_1, y_2) is some other bundle such that p_1x_1 + p_2x_2 >= p_1y_1 + p_2y_2. Then if the consumer is choosing the most preferred bundle she can afford, we must have (x_1, x_2) > (y_1, y_2). Statement II: If one bundle is chosen when another could have been chosen, we can say that the first bundle is revealed preferred to the second. In the light of the above statements, choose the correct answer from the options given below:
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This question is on Revealed preference, part of Consumer preferences and utility in Microeconomics.
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Question from the CUET-PG 2023 Shift 1 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.