Hello all. I'm currently studying for an economics midterm and I ran into a problem trying to understand this topic. We need to know how to derive a demand curve when it comes to an individual and 2 products. Demand curves are basic but I just don't understand how it all comes together with budget lines, the consumer indifference curves and price consumption curve. All I have in my notes are the demand curve, budget line, consumer indifference curve and price consumption curve shoved together in one graph but I have no idea how it all came about.
A sample question that I would need to solve using this problem is:
James and Sarah only consume tuna [x-axis product] and pizza [y-axis product]. James and Sarah have hit hard times and each of their commission incomes [their only income] has decreased by 25%. After this decrease in disposable income, James purchases more units of pizza and Sarah purchases fewer units of pizza in their new equilibrium positions when they maximize their levels of consumer satisfaction. After observing these results, Andrew takes the position that consumer behaviour analysis would only support the results obtained by Sarah.”
Draw separate consumer indifference curve diagrams for each individual, which shows the initial and final equilibrium positions. In each of these diagrams, draw the income consumption curve. Take a position on Andrew’s findings and explain your reasoning.