Explain properties of consumer preference
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properties of CP
1.completeness
2.transitivity
3.More is better
Consumers always choose goods which give the most pleasure. So how do we measure about
the pleasure? And how do we rank the goods? Economists assume that consumers have a
set of tastes or preferences that they use to guide them in choosing between goods.
These preferences have to satisfy three properties:
1. Completeness:
When consumers face a choice between any two bundles of goods, a
consumer can always rank them by the following relationships: For choice between A and
B, either A > B, or B > A, or A = B. Here, ”>” means ”prefer to”, while ”=” means
”indifferent”. This property rules out the possibility that consumers cannot decide which
bundle is preferable.
2. Transitivity:
the ranking must be consistent in the sense that, if consumer weakly
prefer Bundle z to Bundle y, and weakly prefer Bundle y to Bundle x, then it must be true
that consumers prefer z to x. (”weakly prefer” means that z is at least as good as y)
3. More is better:
If all else the same, more of a good is always preferred to less of that
good. ”Good” here is defined by economist as a commodity for which more is better than
less. ”Bad” is defined as a commodity for which less is preferred, for example, ”pollution”.
Since consumers can always throw away the extra goods that they don’t want, so more
goods at least don’t make consumer worse off. That is why this property is here.
1.completeness
2.transitivity
3.More is better
Consumers always choose goods which give the most pleasure. So how do we measure about
the pleasure? And how do we rank the goods? Economists assume that consumers have a
set of tastes or preferences that they use to guide them in choosing between goods.
These preferences have to satisfy three properties:
1. Completeness:
When consumers face a choice between any two bundles of goods, a
consumer can always rank them by the following relationships: For choice between A and
B, either A > B, or B > A, or A = B. Here, ”>” means ”prefer to”, while ”=” means
”indifferent”. This property rules out the possibility that consumers cannot decide which
bundle is preferable.
2. Transitivity:
the ranking must be consistent in the sense that, if consumer weakly
prefer Bundle z to Bundle y, and weakly prefer Bundle y to Bundle x, then it must be true
that consumers prefer z to x. (”weakly prefer” means that z is at least as good as y)
3. More is better:
If all else the same, more of a good is always preferred to less of that
good. ”Good” here is defined by economist as a commodity for which more is better than
less. ”Bad” is defined as a commodity for which less is preferred, for example, ”pollution”.
Since consumers can always throw away the extra goods that they don’t want, so more
goods at least don’t make consumer worse off. That is why this property is here.
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