In order to derive consumer,s demand curve from (pcc)we explain firstly,
What is demand curve and PCC
Demand curve:----* “a curve represents how much of a commodity
is purchases at different prices”.(we can say there is relationship(between
price &quantity)
Price Consumption Curve(PCC):--- we
can get PCC from PE by joining the equilibrium points as E1, E2, E3
·
the locus
of all successive equilibrium points are known as PC.
Such PCC is attributed to j.r.hicks.
·
the
price consumption indicates the various amount of commodity bought by the
consumer when its price changes
Now we drive demand curve “Marshallian
demand curve or ordinary demand curve with the help of PCC or Hickian
indifference curve.
Assumptions: --- *
·
the
money to be spent is constant which is Rs 20.
·
Price
of X falls and income and price of Y remain constant.
·
The consumer
is rational.
Note.
We are assuming to drive the demand curve for X commodity.
Schedule for (DD)
|
Px=4. P1 Px=2. P2 Px=1. P3 |
Ox1 0x2 0x3 |
v a v b v c |
Explaintion:the individual DD curve is derived simply as
follows if i=20 x=4,py=2
The budget line isAB and equilibrium at E1 and, Ox1 of X
commodity if i=20 px=2,py=2
The budget line is shift as AB1 ,equ at E2 and
Ox2 of Xcommodity if i=20 px=1,py=2
The budget line is shift as AB2 ,equ at E3 and
Ox3 of xcommodity---------------
By joining all successive equ points we have PC.
Now we deduce the demand curve with the help of this schedule. As by
the help of attaing values we.can get the demand curve DD for commodity x shown in the
diagram.*