Mac Rowe doesn't sweat the petty stuff.In fact, he just cannot detect small differences.He consumes two goods, x and y.He prefers the bundle (x, y)to the bundle (x', y')if and only if (xy - x'y' 1).Otherwise he is indifferent between the two bundles.
a.Show that the relation of indifference is not transitive for Mac.(Hint: Give an example.)
b.Show that the preferred relation is transitive for Mac.

Question

Mac Rowe doesn't sweat the petty stuff.In fact, he just cannot detect small differences.He consumes two goods, x and y.He prefers the bundle (x, y)to the bundle (x', y')if and only if (xy - x'y' > 1).Otherwise he is indifferent between the two bundles.
a.Show that the relation of indifference is not transitive for Mac.(Hint: Give an example.)
b.Show that the preferred relation is transitive for Mac.

Quizplus · Accepted Answer

The Answer of Mac Rowe doesn't sweat the petty stuff.In fact, he just cannot detect small differences.He consumes two goods, x and y.He prefers the bundle (x, y)to the bundle (x', y')if and only if (xy - x'y' > 1).Otherwise he is indifferent between the two bundles.
a.Show that the relation of indifference is not transitive for Mac.(Hint: Give an example.)
b.Show that the preferred relation is transitive for Mac.

Mac Rowe Doesn't Sweat the Petty Stuff