When the prices were ($5, $1), Vanessa chose the bundle (x, y)= (6, 3).Now at the new prices, (p_x, p_y), she chooses the bundle (x, y)= (5, 7).For Vanessa's behavior to be consistent with the weak axiom of revealed preference, it must be that A)4p_y

Question

When the prices were ($5, $1), Vanessa chose the bundle (x, y)= (6, 3).Now at the new prices, (p_x, p_y), she chooses the bundle (x, y)= (5, 7).For Vanessa's behavior to be consistent with the weak axiom of revealed preference, it must be that A)4p_y < p_x. B)p_x < 4p_y. C)5p_y < p_x. D)p_y = 5p_x. E)None of the above.

Quizplus · Accepted Answer

The weak axiom of revealed preference states that if a consumer chooses one bundle over another when both are affordable, then the chosen bundle must cost no more than the other bundle at any other prices. Given Vanessa's choices, the total expenditure on the first bundle at the new prices must not exceed the total expenditure on the second bundle at the original prices for her behavior to be consistent with the axiom. This leads to the inequality involving the prices of the second bundle being less than a multiple of the prices of the first bundle, as correctly stated in option A.

When the Prices Were ($5, $1), Vanessa Chose the Bundle