The individual and market demand curves, Managerial Economics

The individual and market demand curves

The quantities and prices in the demand schedule can be plotted on a graph. Such a graph after the individual demand schedule is called The Individual Demand Curve and is downward sloping.

An individual demand curve is the graph relating prices to quantities demanded at those prices by an individual consumer of a given commodity

The curve can also be drawn for the entire market demand and is called a Market Demand Curve:

1060_market Demand Curve.png

A market demand curve is the horizontal summation of the individual demand curves i.e. by taking the sum of the quantities consumed by individual consumers at each price.

Consider a market consisting of two consumers:

2404_market Demand Curve1.png

At price P1 fig. 2:2 above, consumer 1 demands q1, consumer II demands quantity q2, and total market demand at that price is (q1+q2). At price p2, consumer 1 demands q'1, and consumer II demands quantity q'2 and total market demand at that price is (q'1+q'2). DD is the total market demand curve.

Posted Date: 11/27/2012 4:57:31 AM | Location : United States

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