5.4 market demand curve

• Market demand curve represents the total quantity demanded by all consumers in the market at each price level.
• Steps to Construct the Market Demand Curve:

  1. Start with Individual Demand Curves:

  • The demand for a good from each individual consumer is captured in their individual demand curves.
  • For each price, you look at how much each consumer is willing to buy. These quantities are then summed horizontally to get the market demand.

  1. Simplest Case – Two Consumers:

  • Let’s assume there are only two consumers in the market.
  • At each price point, we can look at how much each consumer demands and sum those quantities to get the total quantity demanded by the market.
• What the Market Demand Curve Shows:

  • Downward-Sloping Curve: Like individual demand curves, the market demand curve slopes downward, meaning as prices fall, the total quantity demanded in the market increases.
  • The market demand curve represents the total demand from all consumers at each price point.
• Market Demand = Sum of Individual Demand:

  • The market demand curve is created by horizontally adding the quantities demanded by all consumers at each price.
• Market Demand Curve Slope:

  • Like individual demand curves, the market demand curve is also downward-sloping, meaning as prices decrease, total market demand increases.