Question

An individual sets aside a certain amount of his income per month to spend on his two hobbies, collecting wine and collecting books. Given the information below, illustrate both:
a. the price-consumption curve associated with changes curve for wine.
b. the price of wine and the demand
Price Wine 10.00 12.00 15.00 20.00
Price Book 10.00 10.00 10.00 10.00
Quantity Wine 7.00 5.00 4.00 2.00
Quantity Book 8.00 9.00 9.00 11.00
Budget 150.00 150.00 150.00 150.00

Answer 1

Answer and Explanation:

The price consumption curve abbreviated PCC indicates graphically the changes in consumption of goods given changes in prices of the goods

The graph picture attached(please find attached) illustrates the decrease in consumption for wine as the price increases( the higher the price, the lower the demand), hence the downward sloping PCC curve. The other diagram B for book shows increase in quantity demanded even while price is constant causing a straight line not downward or upward sloping curve. This can happen as a result of other factors such as increase in quality of product or other factors. Also notice that we are working with the assumption that consumer's budget is constant so that it does not contribute as a factor for increase in demand