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Question: consider a preference over bundles x1x2 where x1 0...

Question details

Consider a preference over bundles (x1,x2), where x1 ≥ 0 and x2 ≥ 0. Suppose the rational agent with this preference is indifferent among the following three bundles:

(x1,x2), (x1 + 1, x2 - b), (x1 + 2, x2 - c)

where 0 < b < c < x2. Note that these three bundles must lie on the same indifference curve. Suppose also that the agent’s preference is strictly monotone and strictly convex. What does this imply about the relationship b and c?

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