The three drop downs not displated have the options: \"The same\", \"more\" or \

Question

The three drop downs not displated have the options: "The same", "more" or "less"

In the diagram to the right, we have five different combinations of movies and books. Combination A represents 2 movies and 3 books. Combination C represents more books (7) and the same number of movies (2). Points B, E, and F are other combinations with more movies, more books, or more of both. When compared to combination A, combination B provides satisfaction to the consumer When compared to combination F, combination B provides satisfaction to the consumer When compared to combination A combination F provides satisfaction to the consumer These conclusions are based on what assumption about preferences? Movies Completeness More is preferred to less Transitivity

Explanation / Answer

If indifference curves are drawn through each point, it can be seen that combination B lies on a IC higher than a IC on which combination A lies. Higher IC indicates more satisfaction to the consumer. Therefore, when compared to combination A, combination B provides more satisfaction to consumer.

Now, when compared to combination F, combination B is on a lower IC and therefore provides less satisfaction To the consumer.

Compared to combination A, combination F is on a much higher IC and Therefore it provides more satisfaction To the consumer.

These conclusions are based on more is preferred to less assumption about preference. According to this assumption more of a good is preferred to less.

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