In a two-good world (say goods are and ) where any amount of goods , can be consumed if an individual's preference ordering is lexicographic (i.e., is lexicographically preferred to ), then which of the following is the utility function that represents such a preference ordering?
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In a two-good world (say goods are x and y) where any amount of goods x, y can be consumed if an individual's preference ordering is lexicographic (i.e., x is lexicographically preferred to y), then which of the following is the utility function that represents such a preference ordering? (A) u(x, y) = xy (B) u(x, y) = x - 1/y (C) u(x, y) = y - 1/x (D) No utility function can represent such preferences
Consumer preferences and utility has come up 93 times in 7 exams since 2007.
This question is on Perfect substitutes, complements and lexicographic preferences, part of Consumer preferences and utility in Microeconomics.
Preferences that give straight-line, L-shaped or dictionary-ordered indifference sets, and how they differ from standard ones.
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Question from the JNU SSS 2016 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.