Consumption Theory in Terms of Revealed Preference

A DECADE ago I suggested that the economic theory of consumer's behaviour can be largely built up on the notion of revealed.preference . By comparing the costs of different combinations of goods at different relative price situations, we can infer whether a given batch of goods is preferred to another batch; the individual guinea-pig, by his market behaviour, reveals his preference pattern-if there is such a consistent pattern. Recently, Mr. Ian M. D. Little of Oxford University has made an important contribution to this field. 1 In addition to showing the changes in viewpoint that this theory may lead to, he has presented an ingenious proof that if enough judiciously selected price-quantity situations are available for two goods, we may define a locus which is the precise equivalent of the conventional indifference curve. I should like, briefly, to present an alternative demonstration of this same result. While the proof is a direct one, it requires a little more mathematical reasoning than does his.