Preference (or "taste") is a concept, used in the social sciences, particularly economics. It assumes a real or imagined choice between alternatives and the possibility of rank ordering of these alternatives. More generally, it can be seen as a source of motivation. Terms like SOSE (Studies of Society & the Environment) not only refer to social sciences but also studies of the environment. ... Jump to: navigation, search Supply and demand The supply and demand model describes how prices vary as a result of a balance between product availability and demand. ... In psychology, motivation is the driving force (desire) behind all actions of an organism. ...

For example, happiness is generally preferred to suffering, sadness, or grief. Also, more consumption of a normal good is generally (but not always) assumed to be preferred to less consumption. Jump to: navigation, search Happiness, pleasure or joy is the emotional state of being happy. ... Suffering is any unwanted condition and the corresponding negative emotion. ...

Microeconomics

In microeconomics, preferences of consumers and other entities are modelled with preference relations. Microeconomics (literally, very small economics) is the study of the economic behaviour of individual consumers, firms, and industries and the distribution of production and income among them. ...

Let S be the set of all "packages" of goods and services (or more generally "possible worlds"). Then ≤ is a preference relation on S if it is a binary relation on S such that a ≤ b if and only if b is at least as preferable as a. It is conventional to say "b is weakly preferred to a", or just "b is preferred to a". If a ≤ b but not b ≤ a, then the consumer strictly prefers b to a, which is written a < b. If a ≤ b and b ≤ a then the consumer is indifferent between a and b. In mathematics, the concept of binary relation, sometimes called dyadic relation, is exemplified by such ideas as is greater than and is equal to in arithmetic, or is congruent to in geometry, or is an element of or is a subset of in set theory. ...

These assumptions are commonly made:

• The relation is reflexive: a ≤ a
• The relation is transitive: a ≤ b and b ≤ c then a ≤ c. Together with reflexivity this means it is a preorder
• The relation is complete: for all a and b in S we have a ≤ b or b ≤ a or both (notice that completeness implies reflexivity). This means the consumer is able to form an opinion about the relative merit of any pair of bundles.
• If S is a topological space, then the relation is continuous if for every pair of convergent sequences and with for all n has x ≤ y. This is automatically satisfied if S is finite.

If ≤ is both transitive and complete, then it is a rational preference relation. In some literature, a transitive and complete relation is called a weak order (or total preorder). In logic and mathematics, a binary relation R over a set X is reflexive if for all a in X, a is related to itself. ... Jump to: navigation, search In mathematics, a binary relation R over a set X is transitive if it holds for all a, b, and c in X, that if a is related to b and b is related to c, then a is related to c. ... This article is about the mathematics concept. ... In mathematics, a binary relation R over a set X is total if it holds for all a and b in X that a is related to b or b is related to a. ... Topological spaces are structures that allow one to formalize concepts such as convergence, connectedness and continuity. ... Convergence means approaching a definite value, as time goes on; or approaching a definite point, or a common view or opinion, or a fixed state of affairs. ...

If a consumer has a preference relation that violates transitivity, then an unscrupulous person can milk them as follows. Suppose the consumer has an apple, and prefers apples to oranges, oranges to bananas, and bananas to apples. Then, the consumer would be prepared to pay, say, one cent to trade their apple for a banana, because they prefer bananas to apples. After that, they would pay once cent to trade their banana for an orange, and again the orange for an apple, and so on.

Completeness is more philosophically questionable. In most applications, S is an infinite set and the consumer is not conscious of all preferences. For example, one does not have to make up one's mind about whether one prefers to go on holiday by plane or by train if one does not have enough money to go on holiday anyway (although it can be nice to dream about what one would do if one would win the lottery). However, preference can be interpreted as a hypothetical choice that could be made rather than a conscious state of mind. In this case, completeness amounts to an assumption that the consumer can always make up their mind whether they are indifferent or prefer one option when presented with any pair of options.

Behavioral economics investigates the circumstances when human behavior is consistent and inconsistent with these assumptions. Nobel Prize in Economics winner Daniel Kahneman, was an important figure in the development of behavioral finance and economics and continues to write extensively in the field. ...

The indifference relation ~ is an equivalence relation. Thus we have a quotient set S/~ of equivalence classes of S, which forms a partition of S. Each equivalence class is a set of packages that is equally preferred. If there are only two commodities, the equivalence classes can be graphically represented as indifference curves. Based on the preference relation on S we have a preference relation on S/~. As opposed to the former, the latter is antisymmetric and a total order. In mathematics, an equivalence relation on a set X is a binary relation on X that is reflexive, symmetric and transitive, i. ... In mathematics, given a set X and an equivalence relation ~ on X, the equivalence class of an element a in X is the subset of all elements in X which are equivalent to a: [a] = { x in X | x ~ a } The notion of equivalence classes is useful for constructing sets... In mathematics, given a set X and an equivalence relation ~ on X, the equivalence class of an element a in X is the subset of all elements in X which are equivalent to a: [a] = { x ∈ X | x ~ a } The notion of equivalence classes is useful for constructing sets out... A partition of U into 6 blocks: a Venn diagram representation. ... In microeconomics, an indifference curve is a graph showing combinations of two goods to which an economic agent (such as a consumer or firm) is indifferent, that is, it has no preference for one combination over the other. ... In mathematics, a binary relation R on a set X is antisymmetric if, for all a and b in X, if a is related to b and b is related to a, then a = b. ... In mathematics, a total order, linear order or simple order on a set X is any binary relation on X that is antisymmetric, transitive, and total. ...

It is usually more convenient to describe a preference relation on S with a utility function , such that u(a) ≤ u(b) if and only if a ≤ b. A continuous utility function always exists if ≤ is a continuous rational preference relation on Rⁿ. For any such preference relation, there are many continuous utility functions that represent it. Conversely, every utility function can be used to construct a unique preference relation. In economics, utility is a measure of the happiness or satisfaction gained from a good or service. ... ↔ ⇔ ≡ Iff redirects here. ... In mathematics, a continuous function is one in which arbitrarily small changes in the input produce arbitrarily small changes in the output. ...

All the above is independent of the prices of the goods and services and independent of the budget of the consumer. These determine the feasible packages (those he or she can afford). In principle the consumer chooses a package within his or her budget such that no other feasible package is preferred over it; the utility is maximized.

References

Kreps, David (1990). A Course in Microeconomic Theory. New Jersey: Princeton University Press. ISBN 0691042640

Mas-Colell, Andreu; Whinston, Michael; & Green, Jerry (1995). Microeconomic Theory. Oxford: Oxford University Press. ISBN 0195073401

See also

Look up prefer on Wiktionary, the free dictionary.

• Revealed preference
• Arrow's paradox
• Behavioral finance
• Economic subjectivism
• Envy
• Gibbard-Satterthwaite theorem
• Greed
• Hope
• Motivation
• Second-order desire
• Sexual desire
• Sexual orientation
• Time preference theory of interest
• Preference regression (in marketing)