Which is the wrong statement about 'Revealed Preference Theory'?

Q: Which is the wrong statement about 'Revealed Preference Theory'?

Which is the wrong statement about 'Revealed Preference Theory'?

Question

Accepted Answer

The correct option is 3:
The Revealed Preference Theory (RPT), introduced by Paul Samuelson, is fundamentally built upon the concept of 'strong ordering' (also known as the Strong Axiom of Revealed Preference or SARP). Strong ordering asserts that if a consumer chooses bundle A over an affordable bundle B at a given price and income level, then the consumer will *never* choose bundle B over bundle A under any conceivable price and income situation where B is affordable and A is also affordable. The core innovation of RPT was to derive the law of demand purely from observable consumer choices, imposing a consistency condition on preferences. Since the theory relies on making definitive statements about preferences based on observed choices (A is definitely preferred to B), it requires a strong ordering of preferences, making the statement that RPT is related to 'weak ordering' the incorrect statement.

The incorrect option is 1:
This is called 'the third root of the logical theory of demand'. This statement is correct. Revealed Preference Theory is often considered the "third root" of demand theory, following the earlier theories of Marginal Utility (Cardinals approach) and Indifference Curves (Ordinals approach). RPT offered a behavioristic alternative to these theories by basing consumer choice solely on observable market data, rather than unobservable psychological utility or hypothetical indifference curves.

The incorrect option is 2:
It was propounded by 'Samuelson' in 1948. This statement is correct. Paul Samuelson first formally introduced the Revealed Preference Theory in his influential paper "Consumption Theory in Terms of Revealed Preference" published in *Economica* in 1948. This publication is the foundational text for the theory.

The incorrect option is 4:
It is related to 'strong ordering'. This statement is correct. As explained above, RPT relies on the Strong Axiom of Revealed Preference (SARP), which establishes consistency for consumer choice, meaning if bundle A is directly or indirectly revealed preferred to bundle B, B must not be revealed preferred to A. This consistency requirement provides a definitive, or "strong," ordering of preferences.