This article will guide you to know how to derive the demand curve from revealed preference.

We can also derive the demand curve of an individual from the revealed preference hypothesis. This is explained in terms of Figure 4. In Panel (A), money is taken on the vertical axis and good X on the horizontal axis. LM is the original price-income line on which the consumer reveals his preference at point R and buys OA of good X.

Suppose that the price of X falls. As a result, his new price- income line is LS. On this line, the consumer reveals his preference at point T where he buys a larger quantity OB of X than before.

The movement from R to T is the price effect of the fall in the price of X which has resulted in its increased demand from OA to ОB. Now take away the increase in the real income of the consumer as a result of the fall in the price of X equal to LP. Thus PQ is the new price-income line which is drawn parallel to LS and passes through point R. The new triangle OPQ be­comes his area of choice.