6A-4 Deriving the Demand Curve
-Refer to Figure 6-9.In part (ii),the line joining points X,Y,and Z is known as ________,which shows how ________.
A)a price-consumption line; consumption changes as relative prices change,with money income constant
B)an income-consumption line; consumption changes as income changes,with relative prices held constant
C)a price-consumption line; consumption changes as money income and relative prices change
D)an income-consumption line; consumption changes with changing relative prices and constant income
E)an indifference map; the value of various combinations of two goods changes

Question

Quizplus · Accepted Answer

The line joining points X,Y,and Z is known as a price-consumption line, which shows how consumption changes as relative prices change, with money income constant. This is because the line represents all the possible combinations of two goods that the consumer can buy at a given level of income, while maintaining the same level of utility. The slope of the line represents the relative price of the two goods, and the movement along the line shows the change in consumption as the price of one good changes while the price of the other remains constant.