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Home Theory of Demand Individual's and Market Demand for a Commodity

Individual's and Market Demand for a Commodity:

 

Individual's Demand for a Commodity:

 

Definition and Explanation:

 

"The individuals demand for a commodity is the amount of a commodity which the consumer is willing to purchase at any given price over a specified period of time".

 

The individual's demand for a commodity varies inversely price ceteris paribus. As the price of a goods rises, other things remaining the same, the quantity demanded decreases and as the price falls, the quantity demanded increases.

 

Price (p) is here an independent variable ad quantity (q) dependent variable.

 

Individual's Demand Schedule:

 

The demand schedule of an individual for a commodity is a list or table of the different amounts of the commodity that are purchased the market at different prices per unit of time. An individual demand schedule for a good say shirts is presented in the table below:

 

Individual Demand Schedule for Shirts:

 

Price Per Shirt ($) 100 80 60 40 20 10
Quantity Demanded Per Year Qdx 5 7 10 15 20 30


According to this demand schedule, an individual buys 5 shirts at $100 per shirt and 30 shirts at $10 per shirt in a year.

 

Individual's Demand Curve:

 

Demand curve is a graphic representation  of  the demand schedule. According to Lipsey:

 

"The curve, which shows the relation between the price of a commodity and the amount of that commodity the consumer wishes to purchase is called demand curve".

 

It is a graphical representation of the demand schedule.

 

 

In the figure (4.1), the quantity. demanded of shirts in plotted on horizontal axis OX and price is measured on vertical axis OY. Each price quantity combination is plotted as a point on this graph. If we join the price quantity points a, b, c, d, e and f, we get the individual demand curve for shirts.

 

The DD/ demand curve slopes downward from left to right. It has a negative slope showing that the two variables price and quantity work in opposite direction. When the price of a good rises, the quantity demanded decreases and when its price decreases, quantity .demanded increases, ceteris paribus.

           

Market Demand for a Commodity:

 

Definition and Explanation:

 

The market demand for a commodity is obtained by adding up the total quantity demanded at various prices by all the individuate over a specified period of time in the market It is described as the horizontal summation of the individuals demand for a commodity at various possible prices in market.

 

In a market, there are a number of buyers for a commodity at each price. In order to avoid a lengthy addition process, we assume here that there are only four buyers for a commodity who purchase different amounts of the commodity at each price.

 

Market Demand Schedule:

 

 The horizontal summation of individuals demand for a commodity will be the market demand for a commodity as is illustrated in the following schedule:

              

A market Demand Schedule in a Four Consumer Market:

 

Price ($)

 

Quantity Demanded

Quantity Demanded

Quantity Demanded

Quantity Demanded

Total Quantity Demanded Per Week (in thousands)

 

First Buyer

 

Second Buyer

Third Buyer

Fourth Buyer

10

8

6

4

2

10

15

25

40

60

13

20

30

35

50

6

9

10

15

30

11

16

20

30

40

40

60

85

120

180

 

 

In the above schedule, the amount of commodity demanded by four buyers (which we assume constitute the entire market) differs for each price When the price of a commodity is $10, the total quantity demanded is 4C thousand units per week. At price of $2, the total quantity demanded increases to 180. thousand units.

             .

Market Demand Curve:

 

Market demand curve for a Commodity is the horizontal sum of individual demand curves of ail the buyers in a market. This is illustrated with the help of the market demand schedule given above.

 

 

The market demand curve DD/ for a commodity, like the individual demand curve is negatively sloped, (see figure 4.2). It shows that under the assumptions (ceteris paribus) other things remaining the same, there is an inverse relationship between the quantity demanded and its price.

 

At price of $10, the quantity demanded in the market is 40 thousand units. At price of $2.0. it increases to 180 thousand units. In. other words, the lower the price of the good X, the greater is the demand for it ceteris paribus.

Relevant Articles:

Meanings of Demand
Law of Demand
Individual's and Market Demand for a Commodity
Movement Vs Shifts of Demand Curve
Non Price Factors or Shifts Factors Causing Changes in Demand
Slope of the Demand Curve
 

Principles and Theories of Micro Economics
Definition and Explanation of Economics
Theory of Consumer Behavior
Indifference Curve Analysis of Consumer's Equilibrium
Theory of Demand
Theory of Supply
Elasticity of Demand
Elasticity of Supply
Equilibrium of Demand and Supply
Economic Resources
Scale of Production
Laws of Returns
Production Function
Cost Analysis
Various Revenue Concepts
Price and output Determination Under Perfect Competition
Price and Output Determination Under Monopoly
Price and Output Determination Under Monopolistic/Imperfect Competition
Theory of Factor Pricing OR Theory of Distribution
Rent
Wages
Interest
Profits
Principles and Theories of Macro Economics
National Income and Its Measurement
Principles of Public Finance
Public Revenue and Taxation
National Debt and Income Determination
Fiscal Policy
Determinants of the Level of National Income and Employment
Determination of National Income
Theories of Employment
Theory of International Trade
Balance of Payments
Commercial Policy
Development and Planning Economics
Introduction to Development Economics
Features of Developing Countries
Economic Development and Economic Growth
Theories of Under Development
Theories of Economic Growth
Agriculture and Economic Development
Monetary Economics and Public Finance
History of Money

 

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