1. (a) What do the choice-based and the preference-based approaches to consumer be-
haviour have in common and how do they dier?
(b) Is the choice-based approach useful? Defend your answer carefully.
A preference-based approach (dominant model) Assumes the decision maker has a preference relation over the set of possible choices that satisfies a rationality axiom.
A choice-based approach Focuses directly on the choice behavior imposing consistency restrictions (parallels the rationality axiom of the preference-based approach). consumers made choices about which consumption bundle to choose from a set of feasible alternatives, and, using some rather mild restrictions on choices
The preference-based approach to consumer behavior is to assume that the consumer has well-defined preferences over all of the alternative bundles and that the consumer attempts to select the most preferred bundle from among those bundles that are available. The nice thing about this approach is that it allows us to build into our model of consumer behavior how the consumer feels about trading off one commodity against another