Download Deriving the Demand Curve Review: A demand curve is a graph

Deriving the Demand Curve
Review: A demand curve is a graph showing the relationship between the price of a good
and the quantity demanded of that good, all other things being equal.
The demand curve for a good is derived by finding the consumer’s optimal combination
at various prices.
Using the example of snacks and toys, find the
consumers optimal choice when the price of
the toy is $3.
Under the goods space graph (the top graph
on the left) plot a price/quantity combination
on a graph. Make sure that the quantity scale
is the same as the upper graph.
In this case, at a price of $3, the consumer
demands two toys.
Now change the price of toys to $1.50 each.
The consumer now has a new optimal
combination on a new indifference curve
(the upper graph on the left). He now chooses
four toys at the new price.
Draw a dotted line to the point on lower graph
showing four toys at $1.50 each.
You now have two points on a demand
curve.
When you have two or more points, you
simply connect them to get a demand curve,
as shown at left.
A demand curve is a record of the consumer’s
choices of a product at various prices.