Economics (NCERT) Notes

2.11 Market Demand

Concept of Market Demand

•In a market for a good, there are many consumers.

•The market demand for a good at a particular price is the total demand of all consumers taken together.

•The market demand for a good can be derived from the individual demand curves.

•Suppose there are only two

Market demand for two consumers

•Suppose there are only two consumers in the market for a good.

•Suppose at price p’, the demand of consumer 1 is q1’and that of consumer 2 is q2’.

•Then, the market demand of the good at p’ is q1’ + q2’

•The market demand curve of a good can also be derived from the individual demand curves graphically by adding up the individual demand curves horizontally

Adding up Two Linear Demand Curves

•Assume a market where there are two consumers and the demand curves of the two consumers are given as

•d₁(p) = 10 – p

•d₂(p) = 15 – p

•Thus

•At any price greater than 10, the consumer 1 demands 0 unit of the good,

•At any price greater than 15, the consumer 2 demands 0 unit of the good.

Market demand curve for two consumers

Price less than or equal to 10

•The market demand can be derived by adding equations

•d₁(p) = 10 – p

•d₂(p) = 15 – p

•If the price is less than or equal to 10, the market demand is given by 25 – 2p

Price greater than 10, and less than or equal to 15

•The market demand equations are

•d₁(p) = 10 – p

•d₂(p) = 15 – p

•For any price greater than 10, and less than or equal to 15, market demand is 15 – p,

Price greater than 15

•The market demand equations are

•d₁(p) = 10 – p

•d₂(p) = 15 – p

•At any price greater than 15, the market demand is 0

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