Question

The assumption of continuity says that:

a. For any two bundles, the consumer can establish a preference ordering.
b. Any bundle is at least as good as itself.
c. If A is preferred to B and B is preferred to C, than A is preferred to C.
d. If bundle A is preferred to bundle B, there is a region around A such that any bundle C that lies in that region is preferred to B.

Answer 1

The correct answer is potion (d) If bundle A is preferred to bundle B, there is a region around A such that any bundle C that lies in that region is preferred to B.

Step-by-step explanation:

The assumption of continuity is all about the choice of different goods and service which the consumers exercise. When two goods are presented before a consumer, a choice can be made on either of them. He can either choose goods A or goods B.

Again, if goods A has been selected and goods B is left, there is a possibility that goods C which lies in that region will be preferred to B.

Answer 2

The answer is D. if bundle A is preferred to bundle B, there is a region around A such that any bundle C that lies in that region is preferred to B

Step-by-step explanation:

Continuity is an assumption. These assumptions are abstractions as such in principle nothing to be found in reality (between the same is the case for distribution models like the famous normal distribution). The reults are reasonably interpretable when the assumptions are reasonable for the data used to fit the models.