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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. pº = (2,6), x° = (20, 10); p = (3,5), x' = (18, 4)
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.