Economics 【Reading 14】Sample
Earl Hakkim is indifferent between consuming 10 DVDs and 5 books or consuming 8 DVDs and 6 books. The condition of non-satiation in utility theory predicts that: A)
| Hakkim would also be indifferent to consuming 6 DVDs and 7 books. |
| B)
| Hakkim would prefer to consume 11 DVDs and 5 books. |
| C)
| books have twice as much utility for Hakkim as DVDs. |
|
The condition of non-satiation refers to the assumption that consuming more is preferable to consuming less. This means Hakkim would prefer 11 DVDs and 5 books to 10 DVDs and 5 books. Because Hakkim is indifferent between 10 DVDs and 5 books or 8 DVDs and 6 books, and prefers 11 DVDs and 5 books to 10 DVDs and 5 books, we can assume he also prefers (gets more utility from) 11 DVDs and 5 books versus 8 DVDs and 6 books. Although the other statements may or may not be true, they do not reflect the condition of non-satiation. |