4.1 Deriving Demand Curves

Holding people’s tastes, their incomes, and the prices of other goods constant, an increase in the price of a good causes a movement along the demand curve for the good (Chapter 2). We use consumer theory to show how a consumer’s choice changes as the price changes, thereby tracing out the demand curve.

System of Demand Functions

In Chapter 3, we used calculus to maximize a consumer’s utility subject to a budget constraint. We solved for the optimal quantities of sets of goods that the consumer chooses as functions of prices and the consumer’s income. In doing so, we derived the consumer’s system of demand functions for the goods.

For example, Lisa chooses between pizzas, q1,[&q_{1},&] and burritos, q2,[&q_{2},&]

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