Figure 6A-6 Hugh’s Price-Consumption Line
Notice that in this example, as the relative prices of food and clothing
change, the quantities of food and clothing that Hugh purchases also
change. In particular, as the price of food falls, Hugh buys more food and
less clothing.
The price-consumption line shows how the consumer’s purchases react
to a change in one price with money income and other prices being
held constant. Decreases in the price of food (with money income and
the price of clothing held constant) pivot Hugh’s budget line from ab
to ad. Hugh’s utility-maximizing bundle moves from A to B to C. By
joining all the utility-maximizing points, a price-consumption line is
traced out, showing that Hugh purchases more food and less clothing as
the price of food falls.