Utility theory is a quantitative model of consumer preferences and is based on the above axioms. Consumer preferences can be represented by an ordinal utility function:
This is a mathematical expression that shows the relationship between utility values and every possible bundle of goods.
This ordinal - not cardinal - utility captures only ranking and not strength of preferences.
This axiom of completeness does not permit a person to say, "I just cannot decide."
A. This assumption is referred to as the axiom of transitivity.
The axiom of transitivity holds for indifference and strict preference.
A. The axiom of completeness
For economic "goods" (which means these commodities can give you positive satisfaction), the axiom of nonsatiation simply means "the more, the better." You may think of a counter-example; after you have eaten 10 ice cream cones, you will not want even a single one. But don't forget that in a market you can always trade those additional ice cream cones for money and then purchase other goods. Thus "the more, the better" generally holds.
True or False?
Cardinal utility is not supported in the reading. Ordinal utility is the core assumption of consumers' preferences and utility functions.