Individual & Market Demand

Defining demand

Defining demand

• Demand is the amount of a good/service that a consumer is willing and able to purchase at a given price in a given time period

  • If a consumer is willing to purchase a good, but cannot afford to, it is not effective demand

Individual and market demand

• Market demand is the combination of all the individual demand for a good/service

  • It is calculated by adding up the individual demand at each price level  

The monthly market demand for newspapers in a small village

Drawing and interpreting a demand diagram

Drawing and interpreting a demand diagram

• A demand curve is a graphical representation of the price and quantity demanded (QD) by consumers

  • If data were plotted, it would be an actual curve

    • However, economists often use straight lines so as to make analysis easier

• The law of demand states that there is an inverse relationship between price and quantity demanded (QD)

  • When the price rises, the QD falls

  • When the price falls, the QD rises

• Individual and market demand can both be represented graphically
   

  

Diagram analysis

• A shop sells both boys and girls swimwear

• In July, at a price of $10, the demand for boys swimwear is 500 units and girls is 400 units

• At a price of $10, the shop's market demand during July is 900 units