From Individual To Market Demand Curve
The market demand curve is the horizontal summation of individual consumer demand curves. Aggregation introduces three additional non-price determinants of demand: (1) the number of consumers; (2) "the distribution of tastes among the consumers"; and (3) "the distribution of incomes among consumers of different taste." Thus if the population of consumers increases, ceteris paribus the market demand curve will shift outward (to the right). If the proportion of consumers with a strong preference for a good increases, ceteris paribus the demand for the good will increase. Finally if the distribution of income changes is favor of those consumers with a strong preference for the good in question the demand will shift out. Factors that affect individual demand can also affect market demand. However, net effects must be considered. For example, a good that is a complement for one person is not necessarily a complement for another; Further, the strength of the relationship would vary among persons. So in the aggregate the goods might be substitutes or complements. Finally the demand for a firm's product or services will often depend on such factors as competitors prices and marketing strategies.
Read more about this topic: Demand
Famous quotes containing the words individual, market, demand and/or curve:
“Though it is very important for man as an individual that his religion should be true, that is not the case for society. Society has nothing to fear or hope from another life; what is most important for it is not that all citizens profess the true religion but that they should profess religion.”
—Alexis de Tocqueville (1805–1859)
“At market and fair, all folks do declare,
There is none like the Boy that sold Broom, green Broom.”
—Unknown. Broom, Green Broom (l. 23–24)
“I demand that my books be judged with utmost severity, by knowledgeable people who know the rules of grammar and of logic, and who will seek beneath the footsteps of my commas the lice of my thought in the head of my style.”
—Louis Aragon (1897–1982)
“The years-heired feature that can
In curve and voice and eye
Despise the human span
Of durance—that is I;
The eternal thing in man,
That heeds no call to die.”
—Thomas Hardy (1840–1928)