The price consumption curve so derived is horizontal. ![]() We are interested to see the effect of change in the price of good X on the consumer’s equilibrium. Here, we take the combination of normal good (Good X) and essential or a neutral good (Good Y). Given the budget constraint and different levels of satisfaction depicted by the consumer's U1, U2, and U3, the graph shows the income consumption curve along the x-axis, assuming the prices of oranges are less than the prices of apples and the consumer buys oranges only. The price consumption curve in the case of neutral good is parallel to X-axis. The graph above shows apple juice on the x-axis and orange juice on the y-axis. The income consumption curve for orange and apple juice is as follows. The consumer will use apple juice only if the price of apple juice is less than the orange juice and would buy orange juice only if the price of orange juice is less than the price of apple juice this is because both the juices are perfect substitutes for one another.Ĭorresponding to this behavior, the price consumption curves will lie along the axis only as depicted in the graph however, if both the juices' prices are equal, the consumer will allocate their expenditure accordingly. The graph given above shows apple juice on the x-axis and orange juice on the y-axis. ![]() The price consumption curve for orange and apple juice is as follows.
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