One consumption bundle is revealed preferred to a second bundle if:
A) a consumer voluntarily chooses it over the second bundle.
B) surveys reveal that consumers are more likely to choose it than the second bundle.
C) it is cheaper than the second bundle.
D) it lies on a higher indifference curve than the second bundle.

Question

Quizplus · Accepted Answer

Revealed preference theory states that a consumer's preferences can be determined by observing their choices. Therefore, if a consumer voluntarily chooses one consumption bundle over another, it is an indication that they prefer the chosen bundle. Alternatively, surveys may not accurately reflect true preferences and prices or indifference curves do not necessarily determine preference.

One Consumption Bundle Is Revealed Preferred to a Second Bundle