Last updated on June 13th, 2020 at 08:31 pm
Market Demand For a Commodity : The market demand for a commodity means the total demand for a commodity made by all the individuals in the market. The market demand for a commodity gives the alternative amounts of a commodity demanded per time period, at various alternative prices, by all the individuals in the market. It depends on all the factors as the individuals demand depends on. It is obtained by the horizontal summation of all the individuals demand curves for the commodity. …
Explanation : Considering two identical individuals A and B in the market. Each of them has demand for the X commodity which is given by the following function,
Here, Qdx is the quantity demanded and Px is the price of X. Now, placing various prices in that equation and getting the quantities demanded by both A and B.
Now, we will plot these various values of both A and B on a graph to obtain the market demand for the X commodity.
dA = Demand curve of individual A.
DB = Demand curve of individual B.
Dx = Market demand curve. Px ($) = Price of X commodity in dollar.
QdxA = Quantity demanded by individual
QdxB = Quantity demanded by individual
QDx = Quantity demanded by the market. So, from the graph and the table for market demand, it is found that the market demand is the summation of all the quantities demanded by all the individuals of the market at that price. Here, at price 4$, individual A demanded 4 units of X and B demanded 4 units of X. So the market demand is 8 units. Similarly at 0$ the market demand is 16 units of X which is the summation of the quantity demanded by A and B at the price 0$.