Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
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.