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Gruber - 2018 : Lecture 2

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The demand curve: A model of utility maximization

  1. Preferences - how to model people's tastes

  2. Budget constraints (next lecture)

Preference assumptions

  1. Completeness: An agent has Preference over any set of goods it might choose from; it can always rank them (with possibly ties). An agent can indeed be indifferent, but it cannot say "I don't know which one do I prefer.".

  2. Transitivity.

  3. Non-satiation: An agent always prefer more of a good over less.