Answer to Question #30280 in Microeconomics for Sardar Anan

Question

what is the basic difference between revealed preferences hypothesis and indifference curves approach? How the demand curve of a consumer is derived under the revealed preference theory?

Answer 1

The revealed preference hypothesis is considered as a major breakthrough in the
theory of demand, because it has made possible the establishment of the
"law of demand" directly (on the basis of the revealed preference
axiom) without the use of indifference curves and all their restrictive
assumptions. Regarding the use of consumers' preferences, the revealed
preference hypothesis has the advantage over the Hick-Allen approach of
establishing the existence and the convexity of the indifference curves (it does
not accept them axiomatically) However, the indifference curves are redundant
in the derivation of the demand curve.