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Subject 5. Revisiting the Consumer's Demand Function Indifference curve analysis lies behind a demand curve. It can be used to examine the effect of price changes and income changes.
If the price of B now falls, the budget line will pivot. The consumer now maximises utility consuming Q3 of product A and Q4 of product B. The fall in the price of product B has led to an increase in the quantity demanded of Q2Q4. This can be shown on a demand curve.
There are two different phenomena underlying a consumer's response to a price drop:
As the price of a product d
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