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Describe how to construct a demand curve for a good using indifference curves and a budget...

Describe how to construct a demand curve for a good using indifference curves and a budget line.

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Answer #1

Demand curve shows the inverse relationship between the price and quantity demanded. Hence, hence price fall, the budget line shift to right and it might touch new indifference curve or higher indifference curve. and quantity of good demanded rises.

Following is diagram:

In diagram, when price falls from Px1 to PX2, the budget line shifts from BC1 to BC2 thereby increasing quantity demanded of good x.

Now demand for quantity X increased from X1 to X2.

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