Economics (NCERT) Notes → Class XII

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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