Relationship between “Market Demand Schedule” and “Market Demand Curve”
Let us take the case of two individuals in the market. The analysis can be extended to any number of buyers. The individual demand schedules of both the individual buyers, ‘A’ and ‘B’ and the market demand schedule is shown in the Table 1.2. Market demand has been found out by adding the individual demands of ‘A’ and ‘B’ at corresponding prices.
In Table 1.2, QA is the demand of ‘A’, QB is the demand of ‘B’ and QA+B represent the combined demand of ‘A’ and ‘B’ (or the market demand) at each price.
At the price of Rs. 12 per kg, ‘A’ demands 1 kg. of apples and ‘B’ demands 2 kg. of apples. The total demand at Rs. 12 per kg. is 3 kg. At price of Rs. 11 per kg, ‘A’ demands 2 kg. of apples and ‘B’ demands 3 kg of apples.
The total demand at this price is 5 kg of apples, which is also the market demand for apples at that price on the assumption that there are only two buyers in the market. Similarly, the total demand of apples at every other price can be found out.
The same relation between price and quantity that has been shown with numbers is displayed graphically in Fig. 1.2. The market demand schedule has now been transformed into a market demand curve. The market demand curve has been found by the horizontal summation of individual demand curves of ‘A’ and ‘B’. Note again that the market demand curve is downward sloping, showing the inverse relationship between price and quantity demanded.
Some people who bought some of the commodity before its price fell may buy more now, because it is cheaper. Further, when price of a commodity falls, new buyers will enter the market and v. ill further raise the demand of the commodity. This is another reason for downward slope of the market demand curve.