We see that the demand curve drawn slopes downward fun left to right as usual. with a continuous curve, we get the usual demand curve of the consumer for the commodity A. Now we can easily c convert this demand schedule into an ordinary demand curve. With the above information, we can draw up the demand schedule of a consumer as follows. the consumer will buy 5 units or the good when price is 301′, and 7 units when price is 24 1. Now tile consumer will be in equilibrium at point 1′, of the price consumption curve on a higher indifference curve C2 and will buy 3 units. The relevant price line becomes MLz (because now 6 units can be purvhased with 240 Paise). because at this point the price line ML, is tangent to the indifference curve C,’ and will buy or demand 2 units of the commodity. 4 units can he purchased with 240 Paise. The consumer will be in equilibrium at the point PI uf the price consumption curve PCC. per unit, the relevant price-income line will he ML, because, at this price. Suppose a consumer has a daily income of 240 P.! If the price of commodity 1\ is 60 P. for which the demand curve is to be drawn. is shown on the X-axis. In the above diagram, the units of money arc shown on the Y-axis and the commodity A. When a demand curve is t., be drawn, units of money are measured on one axis, while amounts of a good for which demand curve is to be drawn arc shown on the other axis. drawn from price consumption curve is cxplain-d with the help of Fig. The way in whieh ordinary demand curve can be. In fact, both give the same information except that the former gives it directly and in a more useful form.
To his price consumption curve for that good. In the lower figure we take Y-axis as price, and X-axis as quantity demanded, when we draw per pendicular lines wc get points ‘a.’, ‘b.’, ‘c.’ and ‘d.’, which shows relation between price OPI, 01’2′ OP) and 01’4 and the corresponding demand curve. When we join all these points we get ‘PCC’ curve that is ‘Price Consumption Curve’. IC1 and IC4 are tangent to budget line.Enee curve ‘IC’ at point ‘a’ like this as price of ‘X’ decreases, a consumer’s budget line shifts from ‘OA’ to ‘Oll”, ‘OC’ and ‘OD’, in the same way consumer moves on to higher indifference curves and they arc tangent to their respective budget line.
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