Price changes

Consider the sequence of optimal points as a decline in the price of x moves you from a to d in the diagram to the right.

Step 1: Add indifference curves Ub and Ud to the top diagram.

The Price Consumption Curve (PCC)

Step 2: Link the optimal consumption points in the top diagram. This is the price consumption curve (PCC).

Consumer Demand

Step 3: Use information from the indifference curve/budget line diagram to complete the following table:

	Budget line intercepts		Demand information
Case	Y-axis (Ig)	X-axis	Px	Qx
a
b
c	$12	9	$1.33	6
d

Step 4: In the lower right hand panel, plot the consumer's demand curve.

(Note: this analysis works basically the same if you have a specific good Y on the vertical axis instead of income spent on other goods (Ig). The key difference is that the demand curve has Px/Py on the vertical axis instead of just Px.)

(Available online (Java): PCC and demand geometry)