中级微观经济学讲义3－偏好与效用.pdf

Chapter 3 PREFERENCES AND UTILITY By WALTER NICHOLSON Slides prepared by Linda Ghent (Eastern Illinois University) Modified by Huihua NIE (Renmin Unversity of China) www.ChinaES. 1 Perfect Rationality • What’s the unique character of (mainstream) Economics? • Perfect rationality -The objects of choice are given -The probability distribution is known -Maximization utility www.ChinaES. 2 Axioms of Rational Choice • Completeness – if A and B are any two situations, an individual can always specify exactly one of these possibilities: • A is preferred to B • B is preferred to A • A and B are equally attractive www.ChinaES. 3 Axioms of Rational Choice • Transitivity – if A is preferred to B, and B is preferred to C, then A is preferred to C – assumes that the individual’s choices are internally consistent www.ChinaES. 4 Axioms of Rational Choice • Continuity – if A is preferred to B, then situations suitably “close to” A must also be preferred to B – used to analyze individuals’ responses to relatively small changes in income and prices – it is close to nonsatiation assumption – Is it rational to waste food in eatery? www.ChinaES. 5 Utility • Given these assumptions, it is possible to show that people are able to rank in order all possible situations from least desirable to most • Economists call this ranking utility (Bentham, utilities an