(This approach is attributed to Leon (1834-1910)
Before deriving the demand curve we
see what is demand curve and cardinal approach.
Consumer demand curve: “a
consumer,s demand curve is a curve which shows how many units of a commodity ,
the consumer is ready to purchase at different prices”
NOTE.(in demand curve, there is relation ship between quantity and
price).
Cardinal approach:---according to this approach, a consumer is in
equilibrium when---------“ MU is equal to prices”
(we can say in a cardinal approach there is relationship between MU
and prices) if we find the quantity against the MU at some certain prices then
we can draw the demand curve easily.for this purpose we get the assistance from
the following values.
Income = 12 Px= 2 Py= 1
|
Good x Units |
.Mux. |
Good y Units |
.Muy. |
|
1. 2. 3. 4. 5. 6. |
16. 14. 12. 10. 8. 6. |
1. 2. 3. 4. 5. 6. |
11. 10. 9. 8. 7. 6. |
We adopt the same procedure as in
the law of equ marginal utility for getting the quantity against the MU at two
different prices.
NITE.here we are drawing the demand
curve only for X good. And we would decrease the price of X only.
Putting
all the values in the budget constraint equation xpx+ypy = 1 12X + 1y =12 and If consumer
purchase 3 of x and 6 of y 3(2) +6(1) =12
Putting MU of respecting units of
goods in utility maximization equation
Mux/px=Muy/py .
12/2 = 6/1 . 6=6
hence the consumer is in equilibrium.
So corresponding to equilibrium
against the mu = 12 we get quantity 3 unit of price 2.
…. Now for second combination we
suppose price of falls to1/.
Then new equilibrium will be
xpx+ypy=12. 6(1)+6(1)=12. 12=12
Mux/px = Muy/py .
6/1 = 6/1. So against the MU =6
quantity 6 unit at price 1 now with the help of these combination i(2,3) and (1,6)
We can draw the demand schedule:
|
Px |
2 |
1 |
|
Qx |
3 |
6 |
With the help of schedule we can
plot a consumer,s demand curve which slopes negatively:
