Advanced Microeconomics Problem Set 1: Preference & Choice (Master Level)

Solution:

1.      (a). Rationality in preference and choice means that people would prefer to the thing which makes them satisfied instead of other things. It also can be said that these people are likely choosing goods and services in a rational way. When people make a decision, they will consider many factors which can maximize their satisfaction, compare them with the other and also use several information that they have and believe it would make the best decision and choice. There are two properties to describe it further:

1)  Completeness, assumes that there is one thing which would be chosen instead of other things. If there are two goods, let say xand y, people are going to choose x instead of y or vice versa.

2)  Transitivity is a consistent comparison and behaviour by people toward the goods or choices. For example, a student prefers to study instead of work and he is more likely to work than going long vacation, so therefore this student definitely likes to study instead of going long vacation.

(b). Example from everyday life that violates the property:

       - Completeness: If someone has to choose between the two very similar things, then each thing cannot be better off the other, because these are almost indifferent things for him. For example, croissant from bakery A and bakery B are at price, taste, quality, size and other indicators which could be regarded as indifferent, or are just slightly different. When someone is facing either choosing croissant from bakery A or bakery B, he is unable to make a decision quickly because he does not know what his real preference is, due to the “extremely slightly difference” of the choices.

       - Transitivity: It will be happened if the people are being to be inconsistent. For instance, someone like to eat bread with cheese instead of milk and he will use milk instead of chocolate, but he will choose chocolate instead of cheese, because he prefer to eat bread with a chocolate more than cheese.

So that, violation defines the inconsistent and irrational behaviour of the people (or in this case, the consumer).

Para Ahli/Penemu Ekonomi di Bidang Ilmu Mikroekonomi

1. Alfred Marshall

            Alfred Marshall (lahir 26 Juli 1842 di Bermondsey, London, Inggris, meninggal 13 Juli 1924 di Cambridge, Inggris) adalah salah satu ekonom paling berpengaruh pada zamannya. Bukunya, Principle of Economics (1890), adalah buku teks ekonomi yang dominan di Inggris selama bertahun-tahun. Ini mencetuskan ide-ide supply dan demand, utilitas marjinal dan biaya produksi menjadi satu kesatuan yang koheren. Dia dikenal sebagai salah satu pendiri ekonomi.

Karir

            Marshall lahir di Clapham, Inggris, 26 Juli 1842. Ayahnya adalah seorang kasir bank dan Injili yang taat. Marshall dibesarkan di pinggiran kota London dari Clapham dan dididik di Sekolah Merchant Taylor, Northwood dan College St John, Cambridge, di mana ia menunjukkan bakat dalam matematika, mencapai rangking Kedua di 1865 Cambridge Mathematical Tripos. Marshall mengalami krisis mental yang membuatnya untuk meninggalkan fisika dan beralih ke filsafat. Dia mulai dengan metafisika, khususnya "landasan filosofis pengetahuan, terutama dalam kaitannya dengan teologi". Metafisika menunjukkan Marshall tentang etika, khususnya versi Sidgwickian utilitarianisme; Etika, pada gilirannya, menyebabkan dia mengarah ke ekonomi, karena ekonomi memainkan peran penting dalam menyediakan prasyarat untuk perbaikan kelas pekerja. Bahkan ketika dia berpaling untuk ekonomi, pandangan etisnya terus menjadi kekuatan dominan dalam pemikirannya.