Harry tells you that he prefers Pepsi to Coke, Coke to 7-UP, and 7-UP to Pepsi. This violates what assumption made when analyzing consumer preferences?
A) that more is better
B) that there is a diminishing marginal rate of substitution
C) that consumers are rational
D) that consumers are able to choose among all the combinations of goods and services available

Question

Quizplus · Accepted Answer

Harry's preferences are cyclic and inconsistent, which violates the assumption of rationality in consumer behavior. Rational consumers should have transitive preferences, meaning if they prefer A over B and B over C, they should prefer A over C, which is not the case here.

Harry Tells You That He Prefers Pepsi to Coke, Coke