Question

When prices are (p1, p2) = (1, 2), a consumer demands (x1, x2) = (1, 2). When prices are (2, 1), the consumer demands (2, 1). Is this behavior consistent with the Weak Axiom of Revealed preferences? Why yes or why not?

Answer 1

The behavior described is consistent with the Weak Axiom of Revealed Preferences.

Step-by-step explanation:

The behavior described is consistent with the Weak Axiom of Revealed Preferences. According to this axiom, if a consumer initially prefers one basket of goods when faced with prices (p1, p2) and later changes their preference to a different basket of goods when faced with prices (q1, q2), then it must be the case that (q1, q2) is revealed to be at least as preferred as (p1, p2). In the given scenario, the consumer's demand changes from (1, 2) to (2, 1) when prices change from (1, 2) to (2, 1), which is consistent with the Weak Axiom of Revealed Preferences.