高级微观经济学Preference and Choice教学文稿.ppt

lecture5 for Chu Kechen Honors College * * Advanced Economics(lecture 5: consumption theory I) Ye Jianliang Preference and Choice Content: Preference and rationality The rule of choice Budget Demand function WA and demanded law 1.Preference An (acceptable) alternatives set (or a consumption set ) A (weak) preference relation“ ”: a binary relationship on X, for any , means” x is at least as good as y”. A strict preference “ ”: An indifference relation “ ”: 1.Preference Definition: preference on X is rational if: It’s complete: It’s reflexive: It’s transitive: 1.Preference Propersition1: if is rational, then: is irreflexive and transitive is reflexive and transitive and symmetric If 2.The rule of choice Weak Axiom of Revealed Preference (WARP or WA) : if for certain , and for and , then must Revealed Preference “ ”: 2.The rule of choice Choice set Proposition2: if are rational, then choice construct satisfied WA. Prop.2 indicate that if the decision-maker have rational preference, than his choice satisfied WA. Is his preference rational if his choice is observed satisfy WA? 2.The rule of choice Definition: for , we say “rational preference rationalization Propersition3: if satisfied WA and contain all subsets of X that is ternary and less than ternary. example: X={x,y,z}, B ={{x,y},{y,z},{x,z}}, C({x,y})={x},C({y,z})={y},C({x,z})={z},(B , C(.)) satisfied WARP, but there is no rationalization preference relation over it. 3.Competive budget Consumption set X and it’s price with the wealth w0. Definition: Walras (competive) budget set Proposition4: if X is concave, then is 4.Demand function For any p and w are strictly positive, the corresponding demand set x(p,w) are nonempty, if x(p,w) is single point, we call it the Walrasian( Marshallian) demand function.