Demand (economics) - From Individual To Market Demand Curve

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.