Consumer Preferences
The cardinal approach of utility uses an imaginary measure of satisfaction, utils. In the ordinal approach, consumer preferences refer to the ranking a consumer makes between different product bundles or baskets. A market basket is a collection of products a consumer can purchase. Two goods are taken in a basket to explain consumer preferences. For example, a market basket could have coffee and sandwiches.
Assumptions about Consumer Preferences
The following assumptions are made:
Completeness
It means that consumers can compare and rank all possible combinations of products, known as baskets. A consumer can definitively state their preference for any two baskets, say A and B. They might prefer basket A over B, B over A, or view them as equally desirable.
Monotonic Preferences or More is Better
It means that consumers prefer more of any good to less. For instance, if a consumer is comparing baskets of goods, under the monotonic preferences assumption, they would always prefer the basket with more quantity.
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