Indifference Curves & Budget Constraint
Demand Curve for Good X
🎯 Price of X (Vary This!)
Price Pₓ $2.00
Budget Parameters
Income (M) $100
Price of Y (Pᵧ) $2.00
Preferences (Cobb-Douglas)
Preference α 0.50
U(X,Y) = Xα · Y(1-α)
Current Optimal Bundle
X* (quantity) 25.0
Y* (quantity) 25.0
Utility 25.0
X* = αM / Pₓ = 0.5 × 100 / 2
Explanation
Key Insight: As the price of X changes, the budget constraint pivots, and the consumer chooses a new optimal bundle. Each optimal X* at each price Pₓ gives us one point on the demand curve!
Budget Constraint
Indifference Curve
Previous Budgets
Optimal Bundle
Price-Consumption Path