ABSTRACT
Indifference curves can be used to analyze reactions to changes in either relative prices or opportunities. Once the indifference curves or preference system of a consumer is known, no other information on his attitudes or personality is required. Clearly the highest indifference curve must be on the boundary. If the boundary were a straight line and if the indifference curves were convex, the equilibrium position would be the point of tangency, where the slope of the budget line equals the slope of an indifference curve. A demand curve shows the relation between relative price and quantity demanded, real income held constant, whereas an Engel curve shows the relation between real income and quantity demanded, relative price held constant. The combined demand curve is an anachronism of the historical development of economics and should be used with extreme care. The market's demand curve is then simply the horizontal sum of each consumer's demand curve.
