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6.2 • How Changes in Income and Prices Affect Consumption Choices 149

FIGURE 6.5 The Foundations of a Demand Curve: An Example of Housing (a) As the price increases from P0 to P1 to
P2 to P3, the budget constraint on the upper part of the diagram rotates clockwise. The utility-maximizing choice
changes from M0 to M1 to M2 to M3. As a result, the quantity demanded of housing shifts from Q0 to Q1 to Q2 to Q3,
ceteris paribus. (b) The demand curve graphs each combination of the price of housing and the quantity of housing

demanded, ceteris paribus. The quantities of housing are the same at the points on both (a) and (b). Thus, the
original price of housing (P0) and the original quantity of housing (Q0) appear on the demand curve as point E0. The
higher price of housing (P1) and the corresponding lower quantity demanded of housing (Q1) appear on the demand
curve as point E1.
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