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Following is a brief discussion about the difference between individual’s demand and market demand for a commodity:

Individual’s Demand for a Commodity:

Definition and Explanation:

“The individual’s demand for a commodity is the quantity 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 to price (ceteris paribus). As the price of a good rises, other things remaining the same, the quantity demanded decreases and as the price falls, the quantity demanded increases. Here, price is an independent variable and quantity is dependent variable.

Individual’s Demand Schedule:

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

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 – Diagram:

Individual’s demand curve is a graphical representation of the demand schedule. According to Lipsey:

“A curve, which shows the relation between the price of a commodity and the quantity of that commodity which the consumer wishes to purchase, is called demand curve.”

Following is a graphical representation of the demand schedule.

In above diagram (4.1), the quantity demanded for shirts is 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 the 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 quantities demanded at various prices by all the individuals over a specified period of time in the market. It is described as the horizontal summation of the individual’s demand for a commodity at various possible prices in the 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 quantities at each price.

Market Demand Schedule:

The horizontal summation of individual’s demand for a commodity will be the market demand for a commodity, as it is illustrated in the following schedule:

In the above market demand schedule, the quantities of the 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 40 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 all 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, it increases to 180 thousand units. In other words, at the lower price of the good X, the greater is the demand for it, (ceteris paribus).