Suppose a consumer’s preferences are monotonic. What can you say about her preference ranking over the bundles (10, 10), (10, 9) and (9, 9)?
Monotonic preferences mean that a consumer prefers a bundle which has more of at least one of the goods and no less of the other good compared to another bundle.
Comparing the bundles: (10, 10) has more of good 2 (10 > 9) and no less of good 1 compared to (10, 9), so (10, 10) is preferred to (10, 9). (10, 9) has more of good 1 (10 > 9) and no less of good 2 compared to (9, 9), so (10, 9) is preferred to (9, 9). Also, (10, 10) has more of both goods compared to (9, 9).
Therefore, the preference ranking from most preferred to least preferred is: (10, 10) > (10, 9) > (9, 9).
Explanation
The textbook defines monotonic preferences as those where a consumer prefers a bundle that has more of at least one good and no less of the other good. By applying this definition pairwise to the three bundles, we can establish a clear transitive preference ranking.
Solution Steps
Step 1: Apply definition of monotonic preferences - prefer bundles with more of at least one good and no less of the other.
Step 2: Compare (10, 10) vs (10, 9) - (10, 10) has more of good 2, so preferred.
Step 3: Compare (10, 9) vs (9, 9) - (10, 9) has more of good 1, so preferred.
Step 4: Establish complete ranking: (10, 10) > (10, 9) > (9, 9).