Question

Explain the theory of revealed prefrence of demand.

Answer 1

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Revealed preference is an economic theory of consumption behavior which asserts that the best way to measure consumer preferences is to observe their purchasing behavior. Revealed preference theory works on the assumption that consumers have considered a set of alternatives before making a purchasing

The Revealed Preference Theory which has been put forward by Paul Samuelson seeks to explain consumer's demand from his actual behaviour in the market in various price-income situations. ... In other words, revealed preference theory regards utilities to be merely comparable and not quantifiable.

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