Utility theory : Assumption
consumer knows his taste & preferences & takes rational actions that result in a more preffered consumption bundle
Assumtion of copletens
given bundles A and B, she must be able to say either that she prefers A to B, or she prefers B to A, or she is indifferent between the two.
Assumption of Transitivity
comparing any three distinct bundles, A, B, and C, if A is preferred to B, and simultaneously B is preferred to C, then it must be true that A is preferred to C.
Assumption of nonsatiation
"more is better" = consumer could never have so much of at least 1 good, that he would refuse it, even if it were free
Represents all the combinations of goods such that the consumer is indifferent about them.