From Individual Demand To Market Demand

In this section, we show how the market demand curve is derived from individual demand curves by using individual demand schedules.

After you have worked through this section of the learning unit, you should be able to:

  • draw a market demand curve given individual demand schedules

The individual household is one of the most important building blocks and much can be learned from the behaviour of an individual household.  However, suppliers are more interested in the market demand for the good and service since the market demand gives them a better idea of the quantities they can expect to sell. The market demand represents the total demand for a good or service during a certain period. In market system, the market demand is one of the fundamental forces that determines the market price of a good or services, and we therefore need to study it in more detail.

To move from individual demand to market demand is quite simple.  All that needs to be done is to add the individual demands together.

Assuming that the demand for fried chicken not only consists of the demand by our students, which forms a household because they make joint decisions, but also the Khumalo and Venter families, and that their demand for fried chicken pieces is known, the market demand can be arrived at as demonstrated in the following table:

Table 3 Market demand schedule for fried chicken pieces

Price(R) Quantity demanded by students Quantity demanded by the Khumalos Quantity demanded by the Venters Market quantity demanded
7 2 4 6 12
6 4 6 8 18
5 6 8 10 24
4 8 10 12 30
3 10 12 14 36
2 12 14 16 42
1 14 16 18 48

At R7, the market quantity demanded is 2 by the students, +4 by the Khumalos and +6 by the Venters, which gives us 12 pieces.  Following the same procedure for the rest of the prices, the market quantity demanded at R6 is 18, at R5 it is 24, at R4 it is 30, at R3 it is 36, at R2 it is 42 and at R1 it is 48.

From the data in the table we can draw the market demand curve for fried chicken pieces. This market demand curve is also downward sloping showing the negative or inverse relationship between the price and the quantity demanded.

Market demand for Fried chicken pieces

Now watch the following video clip to review the technique for calculating market demand from individual demand.

Do the following activity to see if you understand the concept of market demand:

Study the following table, which indicates the demand for tomatoes by various households, and then answer the questions:

Demand for tomatoes per week (kg)

Price per kg (R) Jones Khumalo Strydom Market demand
6 1 2 3  
5 2 4 6  
4 3 6 9  
3 4 8 12  
2 5 10 15  
1 6 12 18  

a. Complete the table by calculating the market quantity demanded at each price.

Click to see the answer

Demand for tomatoes per week (kg)

Price per kg (R) Jones Khumalo Strydom Market demand
6 1 2 3  6
5 2 4 6  12
4 3 6 9  18
3 4 8 12  24
2 5 10 15  30
1 6 12 18  36

b. Use your data to draw the market demand curve.

Click to see the answer