Question

Suppose a consumer’s preferences are monotonic. What can you say about his/her preference ranking over the bundles (10, 10), (10, 9) and (9, 9)?

Answer 1

ANSWER:

(10,10)

EXPLANATION:

      A consumer’s choice is monotonic if between 2 bundles, the consumer chooses the bundle that has more of atleast one good (as it gives him/her more satisfaction) and not less of the other good (as lesser goods would have given him/her lesser satisfaction).

      Considering the bundle (10, 10), this bundle has equal quantity of good 1 but more of good 2 compared to the bundle (10, 9) and compared to (7, 10), it has more of good 1 and equal number of good 2. As the consumer has monotonic preference, he/she would choose the bundle (10, 10) in preference to the other 2 bundles (10, 9), and (7, 10).