The BMZ Academy @ 061 262
THE BMZ ACADEMY
@061 262 1185/068 053 821
BMZ ACADEMY 061 262 1185/068 053 8213
, BMZ ACADEMY
ECS2601 - Assignment 01 2025
Question 1: (15 Marks)
1.1 In microeconomics, we need to make certain assumptions about the preferences
of consumers. Use real-life examples to explain any two of these assumptions. (4
Marks)
The three main assumptions are completeness, transitivity and non-satiation (the
'more is better' assumption.
Completeness
This assumption states that a consumer can always compare any two bundles of
goods and express a preference for one over the other or be indifferent between
them. In other words, the consumer can always rank any two bundles. According to
Arnold (2019) consumers can compare and rank all possible bundles of goods. For
example, if a person prefers an apple over a banana, they can consistently rank their
preference.
Non-satiation (or "more is better")
This assumption posits that a consumer always prefers more of a good to less,
assuming that the additional consumption does not negatively impact the ability to
consume other goods. If bundle A represents more of at least one good, and no less
of any other good, then bundle A is preferred to B. This is often referred to as strict
monotonicity of preferences.
Transitivity
This assumption dictates that if a consumer prefers good A to good B and good B to
good C, then they must prefer good A to good C. This ensures that preferences are
logically consistent. For instance, if a consumer prefers apples to bananas and
banana to peers, then they will prefer apples to pears. If John prefers Nike over
Adidas and Adidas over Puma, then he should prefer Nike over Puma for
consistency.
BMZ ACADEMY 061 262 1185/068 053 8213Page 2 of 14
THE BMZ ACADEMY
@061 262 1185/068 053 821
BMZ ACADEMY 061 262 1185/068 053 8213
, BMZ ACADEMY
ECS2601 - Assignment 01 2025
Question 1: (15 Marks)
1.1 In microeconomics, we need to make certain assumptions about the preferences
of consumers. Use real-life examples to explain any two of these assumptions. (4
Marks)
The three main assumptions are completeness, transitivity and non-satiation (the
'more is better' assumption.
Completeness
This assumption states that a consumer can always compare any two bundles of
goods and express a preference for one over the other or be indifferent between
them. In other words, the consumer can always rank any two bundles. According to
Arnold (2019) consumers can compare and rank all possible bundles of goods. For
example, if a person prefers an apple over a banana, they can consistently rank their
preference.
Non-satiation (or "more is better")
This assumption posits that a consumer always prefers more of a good to less,
assuming that the additional consumption does not negatively impact the ability to
consume other goods. If bundle A represents more of at least one good, and no less
of any other good, then bundle A is preferred to B. This is often referred to as strict
monotonicity of preferences.
Transitivity
This assumption dictates that if a consumer prefers good A to good B and good B to
good C, then they must prefer good A to good C. This ensures that preferences are
logically consistent. For instance, if a consumer prefers apples to bananas and
banana to peers, then they will prefer apples to pears. If John prefers Nike over
Adidas and Adidas over Puma, then he should prefer Nike over Puma for
consistency.
BMZ ACADEMY 061 262 1185/068 053 8213Page 2 of 14
