Answer: Compensated demand curves . The compensated demand curve is the derivative of the expenditure function with respect PI: aE(PI, Py. ) _ U(2/3) (3/4) (2pz/3) 1/4 (12P4) 4 The compensated demand curve is therefore 9Py 1/4 U 8P2 Uncompensated demand is higher when the price is below the reference point where both tersect (since the compensated income would be lower than the original income); compensa demand is higher when the price is above the reference point (since compensated incom then higher than the original income).