Consumer behavior.
Preference and Utility.
If an individual prefers A to B, then they are better off with A than B.
Properties of preference:
Completeness: if there are two options A and B, an individual
1. Prefers A to B 2. Prefers B to A 3. Is indifferent to A and B This property rules out indecision.
Transitivity: if A is preferred to B and B is preferred to C, then A is preferred to C.
This property rules out inconsistency.
Continuity: if A is preferred to B, and if C is close to A, then C is preferred to B.
Rules out discontinuity or jumps and knife-edge situations in preference.
The level of satisfaction from consumption of a good.
If iff A is preferred to B.
Utility is ordinal. i.e. the value doesn't matter, just the order. Thus, U(A)=30, U(B) = 40 is the same as U(A) = 0.03, U(B) = 40000.