Deriving A Demand Curve From Indifference Curves And Budget Constraints

How to derive Individual’s Demand Curve from indifference Curve Analysis?

A demand curve depicts how much quantity of a commodity will be bought or demanded at various costs, presuming that proclivity and tastes of a customer’s income, costs of all goods remain same (constant).

This demand curve depicting clear association between the cost and quantity demanded can be obtained from price utilization curve of indifference curve analysis.

According to Marshallian utility analysis, demand curve was derived on the presumptions that utility was cardinally quantifiable and marginal utility of money lasted constant with the difference in price of the commodity. In the indifference curve analysis, demand curve is derived without making these uncertain presupposition.

Contemplate a person consuming apples (X1 )and bananas (X2 ), whose income is N and market prices of X1 and X2 are P’1 and P ‘2 accordingly. Figure (a) portrays his or her consumption equilibrium at point C, where he or she buys X ‘1 and X ‘2 quantities of apples and bananas respectively. In console (b) of figure, we plot P ‘1 against X ‘1 which is the first point on the demand curve for X1

Demand Curve

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