Readers Question: what axioms underlie the theory of consumer behaviour? How reasonable are they? I have the axioms: completeness, transitivity, continuity, non-satiation and convexity. but we have never been taught about how reasonable they are and I can’t find any info anywhere! please  help

It is an interesting question. I am not really qualified to give a good answer as I am not familiar with some of the terms you mention. However, I will look at the issue from a more general perspective.

Rational preference

If a consumer prefers A to B and also prefers B to C. Then, it follows a rational consumer should prefer A to C.

E.g. you prefer Starbucks to Costa Coffee and you prefer Costa Coffee to McDonald’s then you should prefer Starbucks to going to McDonald’s.

Are there consumers who might, given the above, still prefer McDonald’s to Starbucks? It is pretty unlikely, but, consumers can always behave on a whim. It is not impossible.

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As a keen cyclist, I went down to London last weekend to watch the Olympic road race. It was pretty exciting standing on the Fulham road watching the peleton go past. That part of London seemed pretty busy and nearby cafes were doing very well. However, in the centre of London, many shops and hotels have complained of lower than expected business – with many tourists and shoppers being put off by threats of traffic chaos.

Given forecasts of four hour traffic jams, it is unsurprising that so many stayed away. However, whilst some have sought to avoid London during the Olympics, there have also been a new wave of visitors, who will hopefully want to revisit a revitalised London in the future.

The economic legacy of London 2012 is going to be much more than the three week duration of the Olympics. However, given the last GDP statistics showing a shock 0.7% fall (partly blamed on Jubilee holiday) The government will be hoping that the Olympics gives the economy a boost – there are only so many times you can blame falling GDP statistics on bad weather and public holidays.

Feel Good Factor?

UK consumer confidence is near record low levels. After four years of recession, creating positive economic news has been difficult. It is possible a successful Olympics will help change consumer confidence and encourage economic activity. From a macro perspective, with a double dip recession the Olympics has come at a good time. The question is whether watching sporting success actually translates into consumer spending and investment. Despite the scale of the Olympics, there are still more important factors affecting economic confidence and growth.

However, I think that overall the Olympics will have a positive effect on economic spirits.

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