Definition
Market
Any arrangement that connects buyers and sellers, enabling them to carry out an exchange.
- Individual demand only focuses on the demand of one consumer.
- Market demand focuses on all the consumers in the market of a good or service.
Individual demand
The individual demand is the various quantities of a good or service that an individual consumer is willing and able to buy at different possible prices during a particular time period, ceteris paribus.
- In Figure 1, it can be seen that when the price of a pizza is:
- $10, the individual is not willing or able to buy any units, hence the quantity demanded is 0.
- $8, the individual is willing and able to buy 2 pizzas.
- $6, the individual is willing and able to buy 4 pizzas.
- By connecting all of these points we construct the individual demand curve for this particular consumer.
Market Demand
Market demand represents the total quantity that all of the consumers in the market together are willing and able to purchase at various prices, during a particular time period, ceteris paribus.
NoteThe market demand is found by summing the all of the individual demands together.
- In Figure 2, it can be seen how the market demand is obtained from the addition of individual demands (for a market of two consumers):
- There are two individual demand curves:
- Individual Consumer 1 ($D_1$)
- Individual Consumer 2 ($D_2$)
- When their individual demands are added up, we get the market demand ($D_m$).
- There are two individual demand curves:
