Assumption of Convex Preferences

… a core term used in Economic Analysis and Atlas102

Definition

The assumption of convex preferences is the assumption that consumers generally prefer “averaged” bundles rather than extremes and implies a diminishing marginal rate of substitution.

As noted in WikiBooks (reference below):

  • Convex preferences imply diminishing marginal rates of substitution. For any two goods, increasingly large amounts of one good are required to compensate for marginal losses of the other
  • Convex preferences may be interpreted as a desire for diversification in consumption
Atlas topic, subject, and course

Consumer Theory and Elasticity of Demand and Supply (core topic) in Economic Analysis and Atlas102 Economic Analysis.

Source

WikiBooks, Advanced Microeconomics – Preference Relations, at https://en.wikibooks.org/wiki/Advanced_Microeconomics/Preference_Relations#Convexity, accessed 12 May 2016.

Page created by: Ian Clark, last modified 18 May 2016.