Economics, 3rd Edition

120  PART 2  SUPPLY AND DEMAND: HOW MARKETS WORK

Deriving the Demand Curve

Using the logic we have developed so far, we can now look at how the demand curve is derived. The 

demand curve shows the quantity demanded of a good for any given price. We can view a consumer’s 

demand curve as a summary of the optimal decisions that arise from his budget constraint and indiffer-

ence curves.

Figure 5.16 considers the demand for pizza. Assume the price of pizza is 

€10 indicated by the budget 

constraint BC

1

 and a consumer optimum with indifference curve I

1

 giving a quantity of pizza bought 

as Q

1

. A series of other budget constraints labelled BC

2

 to BC

5

 indicate successive lower prices of pizza 

and the different consumer optimums indicated by the varying quantities of pizza purchased. The con-

sumer optimums associated with each price of pizza are shown as the