Page 1 : an i ee A, Theory of Consumer Behaviour eee, , income of the consumer falls. Then he_would shift to.a lower indifference curve( The effect, of achange in-price of a good on the quantity of its purchase is known as Sa 3 7, “of other good and the income of the consumer remain the same). The price effect me chemin, the given diagram (Fig. 16) :, Inthe diagram, commodity, x is taken on X axis and, commodity Y is taken onY axis., Money income Oi whe, - consumer remains constant., The price line is AB. The, consumer reaches at the, equilibrium point E. At that, point the price line AB is, tangent to indifference curve, IC,. In other words, the, equilibrium occurs at a point |, where the price or budget line PCC, touches the highest possible, indifference curve. At this, point, he buys OM quantity of, X and ON quantity of Y. Suppose, the price of X falls. Now the real income of the consumer increases (the price of commodity Y, , income of the consumer remain the same). The consumer shall be able to buy, , and the money, more quantity of X. Whenever there is change in the price of commodity X, the budget or price, y X, the price line, , line changes its slope. That is, with every change in the price of commodit, shifts. As already stated, the money income of the consumer remains unchanged and the, price of Y also remains unchanged. Hence, the price line shall not be parallel to the old price, line (only a shift in price line but not parallel). It starts from point A. This indicates that with, the money income of the consumerand the price of Y remaining constant, the consumer shall, not be able to buy more quantity of Y. He shall buy more of X only because the price of X has, fallen. Here, when the price of X falls, his real income increases. Hence, his price line shift to, AB,. Now the consumer reaches at a new equilibrium point E,. At this point, he buys OM,, quantity of X and ON, quantity of Y. Suppose the price of X falls further. Again, the real income, of the consumer increases. The price line again shifts to AB,. The new point of equilibrium is, _E, where the budget line AB, is tangent to the higher indifference Cur 1e IC,. At this point, the quantity of purchase of X is OM, and that of Y is ON,. When We join all successive points of, , equilibrium, we get a curve. This curve is called price consumption urve (PCC). itis also called ;, jum points when the price of wl, , price offer curve. Thus( the curve connecting different equilibri, , nl, , xX, , , , , , , , , Commodity Y, , B, M,, Commodity X (Fig. 16 )