1. Jill is at a restaurant and has determined that she prefers the salmon to the
ID: 1219848 • Letter: 1
Question
1. Jill is at a restaurant and has determined that she prefers the salmon to the beef and the beef to the chicken. When the waiter comes, he tells her that they are out of beef and Jill orders the chicken. What do we know about Jill’s preferences?
Jill’s preferences are rational
Jill’s preferences are not complete
Jill’s preferences, as revealed by her choice, are not sensible.
Jill has changing preferences as it is clear that she only prefers salmon if the restaurant is not out of beef
2. Rational preferences mean that consumers:
Only prefer one to good to another if their spouse approves
Have an opinion on all goods and those opinions are sensible
refuse to reveal their preferences even to themselves.
Do not understand some goods
3. Suppose you are offered the following choices: a) flip a coin and if the coin turns up heads you win $10 or b) you are paid $2. If you choose b) then we say you are:
risk finding
risk loving
risk averse
not rational
a.Jill’s preferences are rational
b.Jill’s preferences are not complete
c.Jill’s preferences, as revealed by her choice, are not sensible.
d.Jill has changing preferences as it is clear that she only prefers salmon if the restaurant is not out of beef
Explanation / Answer
1. c) Jill’s preferences, as revealed by her choice, are not sensible.
It is because if restaurant is fall short of beef then Jill has to order salmon because it provides more utility to her but she orders chicken.
2. b) Have an opinion on all goods and those opinions are sensible.
Rational consumer is that consumer who choose combination of goods which maximises his utility.
3. c) risk averse.
In the above situation, person want certain return and does not involve in a trasaction involving risk. So, person is said to be risk averse. Risk averse person is the person who choose less risky investment if 2 options are provided.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.