The Axiom of Revealed Preference

The Axiom of Revealed Preference is an economic principle stating that if a consumer chooses a certain bundle of goods over another when both are available, then the chosen bundle reveals their preference. For example, if they buy apples instead of oranges when both are affordable, it indicates they prefer apples. This idea helps economists infer preferences based on actual choices, assuming these choices reflect genuine desires rather than random or irrational decisions. It provides a way to understand consumer behavior without directly asking what they prefer, based solely on their observed purchasing patterns.