Figure 6-2 Market and Individual Demand Curves
Market Demand Curves
If this is what each consumer does, it is also what all consumers taken
together do. Thus, the theory of consumer behaviour that we have
considered here predicts a negatively sloped market demand curve as
well as a negatively sloped demand curve for each individual consumer.
As we first saw in Chapter 3 , market demand curves show the
relationship between the product’s price and the quantity demanded by
all consumers together. The market demand curve is the horizontal sum
of the demand curves of all individual consumers. It is the horizontal sum
because we want to add quantities demanded at any given price, and
quantities are measured in the horizontal direction on a conventional
demand curve.
Figure 6-2 illustrates a market made up of only two consumers: Arun
and Bashira. At a price of $3, Arun purchases 2 units and Bashira
purchases 4 units; thus, together they purchase 6 units, yielding one point
on the market demand curve. No matter how many consumers are
involved, the process is the same: Add the quantities demanded by all
consumers at each price, and the result is the market demand curve.