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#cfa #cfa-level-1 #economics #microeconomics #reading-14-demand-and-supply-analysis-consumer-demand #section-3-utility-theory #study-session-4
When we state these axioms, we are not saying that we believe them actually to be true in every instance, but we assume them for the sake of building a model
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3. UTILITY THEORY: MODELING PREFERENCES AND TASTES
les out this kind of inconsistency. If you have studied psychology, however, you will no doubt have seen experiments that show subjects violating this assumption, especially in cases of many complex options being offered to them. <span>When we state these axioms, we are not saying that we believe them actually to be true in every instance, but we assume them for the sake of building a model. A model is a simplification of the real world phenomena we are trying to understand. Necessarily, axioms must be at some level inaccurate and incomplete representations of the phenomen


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