Make your own free website on Tripod.com
4. Market Demand
  A. Meaning
 
1.
 
 
The market demand of a good refers to the quantities that all consumers would buy at various possible prices per time period, other things being constant (i.e. ceteris paribus).
  2. It is the sum of individual demands in a given market.
 
  B. Derivation of a Market Demand Schedule / Curve
 

We can derive the market demand of a good by adding up the quantity demanded by each individual at each price.

For illustration, assume that there are only two individual buyers (A and B) in a market:

 
 
Price of Good X ($)
Individual Demand
Market Demand (units)
A (units)
B (units)
5
4
3
2
1
1
2
3
4
5
1
4
7
10
13
2
6
10
14
18
Derivation of a market demand schedule
 
 
A market demand schedule is obtained by summing up the individual demand schedules. Similarly, we can derive a market demand curve by such "horizontal summation" of individual demand curves, as shown below:
 
 
Derivation of a market demand curve
 
Derivation of a market demand curve
 
 
  • The demand curves for A and B are represented by DA and DB respectively.
  • Adding the two demand curves horizontally, we get the market demand curve for Good : DA+DB .
 
Back   Top