Derivation of Consumers' Demand Curve
The demand curve graphs the relationship between the price of the good and the quantity demanded holding other factors constant. We can derive consumers demand curve for a good say food from consumers equilibrium points, that result from different prices of food (income and price of clothing remaining constant).
Budget lines AN and AR are obtained with a change in the price of food. By transposing the indifference curves on them, we get equilibrium points G, H and K. By joining these points, we derive the price consumption curve PCC as shown in Fig. 3.11. This curve shows the quantities demanded at various prices.
From the top panel, we obtain G1 (Qf = 50 at Pf = 6), H1 (Q = 100 at Pf = 3) and K1 (Qf = 150 at Pf = 2). By joining these points, we derive individual demand curve Dx. We already know that the market demand curve can be obtained by horizontal summation of individual demand curves.
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