In the Theory of Consumer Behavior, Certain Axioms About the Nature

question 60

Essay

In the theory of consumer behavior, certain axioms about the nature of preferences imply that indifference curves cannot cross. Which axioms imply this? Explain your answer using a diagram and using words.

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Definitions:

Long-run Profit

The amount of financial gain achieved over a longer period, taking into account all fixed and variable costs.

Market Demand Curve

Curve relating the quantity of a good that all consumers in a market will buy to its price.

Demand Curve

A graphical representation showing the relationship between the price of a good and the quantity of the good that consumers are willing to purchase at various prices.

Incumbent Firm

An established company that holds a dominant position in a particular market or industry.