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Presentation
 PRICE EFFECT AND DERIVATION OF
DEMAND CURVE FOR NORMAL GOODS
IN THIS PRESENTATION, WE WILL
EXPLORE THE PRICE EFFECT AND
DERIVATION OF THE DEMAND
CURVE FOR NORMAL GOODS,
WHICH ARE THOSE GOODS FOR
WHICH DEMAND INCREASES AS
INCOME INCREASES.
 Introduction
 Price effect is the change
in quantity demanded due
to change in price of the
commodity. In other
words, price effect shows
change in quantity of
commodity purchased due
to change in its price,
remaining other factors
like consumer's income,
taste and preference, and
price of other commodity
constant.

 PRICE CONSUMPTION CURVE
(PCC)
Price consumption curve (PCC) is the locus of various
equilibrium point showing the price effect of the
consumer keeping other things constant. PCC may be
differ according to the different nature of goods. in case
of normal goods PCC becomes downward sloping due
to rise in the consumption of X goods. when its price
falls, equilibrium of the consumer shifts towards the
upper IC curve maintaining the necessary and sufficient
condition of consumers equilibrium.
 Derivation of Demand Curve for Normal
Goods
 The demand curve for a normal
good shows the relationship
between the price of the good
and the quantity of the good
that consumers are willing to
purchase. It slopes downward
from left to right, indicating that
as the price of the good
decreases, the quantity
demanded of the good
increases, and vice versa. The
shape of the demand curve
depends on various factors such
as market conditions, consumer
preferences, and availability of
substitutes.
Q. let a consumer has fixed budget RS.4000, price of
good X(Px) = Rs. 300 and price of good Y(Py) = Rs. 400
 sketch the consumer's budget constraint.

 assume that s/he splits his/her budget equally

between good X and Y. show where s/he ends up in

the budget line.
 sketch the new budget constraint when price of good

Y falls from Rs. 400 to Rs. 200 at Px = Rs. 200 and

budget constraint = Rs. 4000
 Suppose after the fall in price of good Y, s/he spends

Rs. 1600 on Good X and Rs. 2400 on good Y. show

where s/he ends up in the budget constraint.
 derive price demand curve for good Y and explain the

nature of good X and good Y.

 CONCLUSION

In conclusion, the price effect and derivation of

the demand curve for normal goods are critical
concepts in economics that help us understand
how changes in price and income affect the
quantity demanded of a particular good. By
analyzing these relationships, we can make
predictions about consumer behavior and make
informed decisions about pricing and
production strategies.