CHAPTER • Individual and Market Demand 113 price almost always holds But what happens to the consumption of clothing as the price of food falls? As Figure 4.1 (a) shows, the consumption of clothing may either increase or decrease The consumption of both food and clothing can increase because the decrease in the price of food has increased the consumer’s ability to purchase both goods An individual demand curve relates the quantity of a good that a single consumer will buy to the price of that good In Figure 4.1 (b), the individual demand curve relates the quantity of food that the consumer will buy to the price of food This demand curve has two important properties: • individual demand curve Curve relating the quantity of a good that a single consumer will buy to its price The level of utility that can be attained changes as we move along the curve The lower the price of the product, the higher the level of utility Note from Figure 4.1 (a) that a higher indifference curve is reached as the price falls Again, this result simply reflects the fact that as the price of a product falls, the consumer’s purchasing power increases Clothing (units per month) U1 Price-Consumption Curve A D B U3 U2 F IGURE 4.1 EFFECT OF PRICE CHANGES 12 20 Food (units per month) (a) Price of food E $2.00 1.50 Demand Curve G 1.00 H 0.50 12 20 (b) Food (units per month) A reduction in the price of food, with income and the price of clothing fixed, causes this consumer to choose a different market basket In (a), the baskets that maximize utility for various prices of food (point A, $2; B, $1; D, $0.50) trace out the price-consumption curve Part (b) gives the demand curve, which relates the price of food to the quantity demanded (Points E, G, and H correspond to points A, B, and D, respectively)