In the theory of consumer behavior, what does a ' homothetic preference' structure imply for the expansion path of consumption as income rises?

💡 Solution & Explanation

Homothetic preferences in consumer theory denote that the marginal rate of substitution is homogeneous of degree zero, meaning the consumer's expansion path forms a straight ray originating directly from the zero coordinate. Alternative choices refer to different economic phenomena, such as constant price elasticity or intersecting indifference curves which violate basic utility axioms. Microeconomics questions concerning consumer behavior frequently evaluate preference properties.