Mac Rowe Doesn't Sweat the Petty Stuff

question 10

Essay

Mac Rowe doesn't sweat the petty stuff. In fact, he just cannot detect small differences. He consumes two goods, x and y. He prefers the bundle to the bundle if and only if . Otherwise he is indifferent between the two bundles.
a. Show that the relation of indifference is not transitive for Mac. (Hint: Give an example.)
b. Show that the preferred relation is transitive for Mac.

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Definitions:

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Contribution Margin Ratio

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A statistical method used to determine the line of best fit by minimizing the sum of squares of the differences between observed and predicted values.