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Homework answers / question archive /  True, false, uncertain? Please explain your answer (50 words at most)! A consumer that buys bundle x' at prices p’, i = 0,1 satisfies WARP

 True, false, uncertain? Please explain your answer (50 words at most)! A consumer that buys bundle x' at prices p’, i = 0,1 satisfies WARP

Economics

 True, false, uncertain? Please explain your answer (50 words at most)! A consumer that buys bundle x' at prices p’, i = 0,1 satisfies WARP. pº = (2,6), x° = (20, 10); p = (3,5), x' = (18, 4)

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Given consumer buys bundle xi at price pi , i=0,1

p0= (2,6) , x0=(20,10) , p1= (3,5) , x1= (18,4)

  x0 x1
p0 100 60
p1 110 74

Here from the above table, 100 is calculated as by multiplying the commodity bundles of x0 with price p0, that is [(2*20)+(6*10)] = 100. The rest is calculated by the same way.

Here x0 is purchased at p0 even when x1 is affordable. But at p1 , x1 is purchased and x0 is not affordable.

So WARP is satisfied.

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