ECON 2010 MICROECONOMIC THEORY

TUTORIAL 1 EXERCISE 1

1.
a. The Group weakly prefers Chinese Food over Indian Food.
b. The Group weakly prefers Indian Food over Italian Food.
c. The Group weakly prefers Italian Food over Chinese Food.
d. No, it is not transitive. Even though the group weakly prefers
Chinese food over Indian food and Indian over Italian, they prefer
Italian food over Chinese food.
e. The Group would agree as the group weakly prefers Italian food
over Chinese food and they do not mind paying the additional $1 for
the restaurant the Group prefers.
f. The Group would agree again based on the preferences and the
additional $1 at that point in time. Hence they would go to the
Indian Restaurant.
g. The Group would agree to go to the Chinese over the Indian
Restaurant due to the overall preference of the group.
h. The group would end up going from place to place and not having a
place to eat.

2.
a. The Bundle is complete since, whenever Bundle B has more beer
than Bundle A, Tom would weakly prefer B to A, and if all else equal,
Tom would prefer Bundle A to Bundle B.
If Bundle A and B has equal amount of beers, but Bundle A has
lesser of milk, then Tom would weakly prefer B to A.
The preference is complete since A can be weakly preferred to B
and vice versa.
b. Toms preference would be transitive if there was a bundle C,
following the same preference as from A to B.
Hence,
 ECON 2010 MICROECONOMIC THEORY
TUTORIAL 1 EXERCISE 1

c.

Since Bundle A is out of the line, it is not possible to jump from

strictly preferring the position on the path to C to strictly
preferring A to that position. Since it does not cut the line at any
point. Therefore, Toms preference is not continuous as there will
not be at any point from B to C whereby one would prefer A.
d. Lexicographic preference is when one item in the bundle is more
valued than the other. Under the preference, 2 distinct bundles
cannot be indifferent since one item in the bundle is always
preferred than the other no matter how much more of the other
item is.