Description 
The narrator explains how the demand 
curve is derived from looking at an 
indifference curve and changes in price.

Audio Transcript 

Narrator: With ten dollars to spend, Max attains the highest level of utility by consuming three O-burgers and four O-nuggets.  If the price of burgers drops from $2 to $1...Max has a new budget line that extends further out along the horizontal axis because he can buy more O-burgers for the same amount of money. 

Narrator: Max has increased his purchasing power. 

Narrator: To optimize his utility with this new budget line, Max moves to a higher indifference curve. At these prices, Max attains optimal utility by purchasing five burgers and five nuggets. 

Narrator: The lower graph shows the relationship between price of burgers and quantity of burgers.  At a price of $1, Max purchases five burgers.  At a price of $2, Max purchases three burgers. 

Narrator: By drawing a line through these two points, we derive Max's demand curve for O-burgers.  The demand curve shows the quantities that he is willing and able to consume at different prices. Notice that there is an inverse relationship between price and quantity and the curve is downward sloping. As price goes down, the quantity purchased goes up. This is the law of demand. 

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