The assumption that preferences are transitive requires the consumer:
A)to rank any two baskets.
B)to say that basket is preferred to basket if basket is preferred to basket and basket is preferred to basket .
C)to rank a basket with more units of all goods higher than a basket with fewer units of all goods.
D)to have a diminishing marginal rate of substitution.

Question

Quizplus · Accepted Answer

Transitivity in preferences means that if a consumer prefers basket A to basket B and prefers basket B to basket C, then the consumer must also prefer basket A to basket C. This ensures consistency in the ranking of preferences.

The Assumption That Preferences Are Transitive Requires the Consumer