Individual Demand Curves |
The law of demand tells us, that ceteris paribus, the lower the price, the greater the quantity demanded and vice versa.
Xavier is willing and able to pay the most for the initial units of the good or service, but is quickly satisfied. While Zelda is more frugal, but when the price is very low, she is willing and able to buy the most. Yves is inbetween the two extremes.
So for Xavier, Yves, and Zelda, each has a downward-sloping demand curve.
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The Market Demand Curve |
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With a pure private good, the Market Demand Curve is the horizontal summation of all individual's demand curves.
So that at each price, the market quantity is the quantity Xavier will purchase plus the quantity Yves will purchase plus the quantity Zelda will purchase.
| | Xavier's | Yves' | Zelda's | Market |
| | Quantity | Quantity | Quantity | Quantity |
| Price | Demanded | Demanded | Demanded | Demanded |
| 8 | 4 | 0 | 0 | 4 |
| 6 | 6 | 8 | 0 | 14 |
| 4 | 8 | 12 | 0 | 20 |
| 2 | 10 | 16 | 16 | 42 |
The relationship between price and the quantity demanded by the entire market is the market demand curve.
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