This preview shows page 1. Sign up to view the full content.
Unformatted text preview: tially, the consumers budget constraint is the line from point A to point B. The optimum is point C. When the price of potatoes rises, the budget constraint shifts inward and is now the line from point A to point D. The optimum is now point E. Quantity of Pizza 50 150 50 Demand (a) The Consumers Optimum Quantity of Pepsi Price of Pepsi $2 1 (b) The Demand Curve for Pepsi Quantity of Pepsi 150 B A B A I 1 2 New budget constraint Initial budget constraint Figure 21-11 D ERIVING THE D EMAND C URVE . Panel (a) shows that when the price of Pepsi falls from $2 to $1, the consumers optimum moves from point A to point B, and the quantity of Pepsi consumed rises from 50 to 150 pints. The demand curve in panel (b) reflects this relationship between the price and the quantity demanded....
View Full Document
- Spring '10