Question

2.Derive the demand curve for the garment on the y-axis

Answer 1

Let us plot commodity X on horizontal axis and garment on vertical axis. Indifference curve shows the locus of combination of commodity X and garment that provides equal level of satisfaction to consumer. Budget line shows the locus of combination of commodity X and garment that can be purchased by consumer with given income and price level of commodity X and garment. Consumer is initially equilibrium at point A where indifference curve IC1 and budget line PL1 intersects . At this equilibrium, consumer purchase Q1 quantity of garment at price level P1 at point K. When price of garment falls to P2, quantity demanded of garment increases,then price line ( budget line) shifts rightward to PL2 and intersects at IC2 at point B. At this point consumer will buy Q2 amount of garment at P2 level of price at point L . Again the price of garment falls to P3 , then price line would shifts rightward as PL3 and intersects at IC3 at point C . At this point consumer will purchase Q3 level of garment at price level P32 at point m. By joining the point A,B,C, we get price consumption curve. It shows the locus of combination of garment purchased at various level of prices where price of commoditu X and income of the consumer become constant. Plot quantity demanded of garment on horizontal axis and price on vertical axis. By joining various points K,L,M representing the quantity demanded of garment at various price levels , we can obtain the demand curve of garment