Question

Theory of revealed preference is used to derive ............

• A. optimal choice, using incomes, prices, and preference
• B. level of income, using prices, preference, and optimal choice information
• C. preference, using prices, incomes, and optimal choice information
• D. prices, using preference, incomes, and optimal choice information

Hint:

The theory of revealed preference helps to derive consumer preferences by observing their choices under different income and price conditions.

Answer 1

The Correct Option is C

Step 1: Understand the theory of revealed preference.
The theory of revealed preference is a method used to understand consumer preferences by observing their choices in different situations, rather than relying on direct utility functions. It is based on the idea that a consumer's preferences can be revealed by their purchasing decisions when facing different prices and income levels.
Step 2: Analyze the options.
- Option (A) is incorrect because the theory is not primarily used to determine optimal choice using preference.
- Option (B) is incorrect because the revealed preference theory deals with preferences rather than income levels.
- Option (C) is correct because it uses prices, incomes, and optimal choices to derive consumer preferences.
- Option (D) is incorrect because the theory focuses on consumer preferences rather than prices directly.
Final Answer: \[ \boxed{\text{preference, using prices, incomes, and optimal choice information}} \]