User:Rekham/DERIVATION OF DEMAND

 MICROECONOMICS

 * DERIVATION OF THE CONSUMER’S DEMAND CURVE

Figure XXX.1, depicting price effect establishes consumer’s demand behavior. When the price of good X increases, as depicted by the budget constraint PL1, the consumer reduces consumption of good X (OX1). Similarly, when the price of good X decreases, as depicted by the budget constraint PL2, the consumer increases consumption of good X (OX2).

In other words, Figure XXX.1 confirms the law of demand. This is shown in Figure XXX.2. Points a, b and c correspond to quantity demanded of good X corresponding to its price at optimal consumption combinations e1, e and e2respectively.


 * Figure XXX.2
 * Figure XXX.2