Is Optimizing Realistic?

Question 1

If the utility which we derive from consumption of a good does not
depend only on the ________ consumed then the __________ ______ might not be a reliable indicator of choices.

Answer 1

If the utility which we derive from consumption of a good does not
depend only on the quantity consumed then the indifference curves might not be a reliable indicator of choices.

Question 2

• The amount of satisfaction depends on ___________ _______, not just _________.
• _____________ _______ will change - the same quantity of consumption of a good will not always give the same amount of ____________.
• The theory perhaps makes some general __________, e.g. when the price of a good falls and other things remain the same then, in most cases, demand for that good will increase.
• It could be that the theory is ‘correct’, but not of any use to ‘_________’.

Answer 2

• The amount of satisfaction depends on additional factors, not just quantity.
• Indifference curves will change - the same quantity of consumption of a good will not always give the same amount of satisfaction.
• The theory perhaps makes some general predictions, e.g. when the price of a good falls and other things remain the same then, in most cases, demand for that good will increase.
• It could be that the theory is ‘correct’, but not of any use to
  ‘outsiders’.

Question 3

• A consumer’s preferences are _____________.
• If we infer preferences from observed consumption choices then we can’t ever find ___________ ________ (is the theory __________?).
• Similarly, it is always likely that other things have ___ ___________ ___ _____.

However, researchers have tried to test _________ elements of the theory, such as ___________ of choices, choices over time and practical decision-making.

Answer 3

• A consumer’s preferences are unobservable.
• If we infer preferences from observed consumption choices then we can’t ever find contradictory evidence (is the theory falsifiable?).
• Similarly, it is always likely that other things have not remained the same.

However, researchers have tried to test specific elements of the theory, such as consistency of preferences choices, choices over time and practical decision-making.

Question 4

Making the optimal consumption choice looks straightforward when two goods are involved, but even that requires that a person have ________ ___________about the goods and the amount of satisfaction which they will derive from them.

If there are lots of options, or the choice involves time, or some of the options are ‘___ ___’ then it is difficult to suppose that a consumer has all of the information or the cognitive ability to choose between them

Answer 4

Making the optimal consumption choice looks straightforward when two goods are involved, but even that requires that a person have complete information about the goods and the amount of satisfaction which they will derive from them.

If there are lots of options, or the choice involves time, or some of the options are ‘one offs’ then it is difficult to suppose that a consumer has all of the information or the cognitive ability to choose between them