Question

Derive the demand curve using the equi-marginal principle.

Answer 1

To draw the demand curve, we need a minimum of two points that will form the demand curve.

Let us assume the price of oranges is $2 per pound and lemons $1. Income = $5. The marginal utility and MU per dollar of oranges and lemon are:

In this case, the quantity demanded would be: 1 unit of orange and 3 units of lemon.
If price of oranges fell to $1 (nochange in price of lemon), the values in the table would change:

Now, the quantity demanded would be:3 units of oranges and 2 units of lemon.

The demand for oranges based on equi-marginal utility will be:

The demand curve:

This can be extended to touch the two axes: