7.1.4—Individual demand curve derivation

A consumer’s individual demand curve shows the quantity chosen at each possible price, holding income, preferences and other relevant prices constant.

At each price, the consumer chooses the affordable bundle that maximises utility. A lower price changes the budget constraint and the marginal-utility-per-price comparison, producing a new chosen quantity. Joining those price-quantity choices gives the curve.

If the price of coffee falls while income and tea’s price stay fixed, coffee becomes more attractive per dollar and the budget line rotates outward around the tea intercept; the optimal coffee quantity may rise.

A movement along a demand curve is caused by the good’s own price; a change in income or preferences shifts the curve instead.