Read this article to learn about: individual demand curves and market demand curves!
Demand curve is a graphical representation of demand schedule. It is the locus of all the points showing various quantities of a commodity that a consumer is willing to buy at various levels of price, during a given period of time, assuming no change in other factors.
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i. It shows the inverse relationship between the quantity demanded of a commodity with its price, keeping other factor constant.
ii. It can be drawn for any commodity by plotting each combination of demand schedule on a graph.
iii. Like demand schedules, demand curves can also be drawn both for individual buyers and for the entire market. So, demand curve is of two types:
(a) Individual Demand Curve
(b) Market Demand Curve
Individual Demand Curve:
Individual demand curve refers to a graphical representation of individual demand schedule.
With the help of Table 3.1 (Individual demand schedule), the individual demand curve can be drawn as shown in Fig. 3.1.
As seen in the diagram, price (independent variable) is taken on the vertical axis (Y-axis) and quantity demanded (dependent variable) on the horizontal axis (X-axis). At each possible price, there is a quantity, which the consumer is willing to buy. By joining all the points (P to T), we get a demand curve ‘DD’.
The demand curve ‘DD’ slopes downwards due to inverse relationship between price and quantity demanded.
Market Demand Curve:
Market demand curve refers to a graphical representation of market demand schedule. It is obtained by horizontal summation of individual demand curves.
The points shown in Table 3.2 are graphically represented in Fig. 3.2. DA and DB are the individual demand curves. Market demand curve (DM) is obtained by horizontal summation of the individual demand curves (DA and DB).
Market demand curve ‘DM‘ also slope downwards due to inverse relationship between price and quantity demanded.
Market Demand Curve is Flatter:
Market demand curve is flatter than the individual demand curves. It happens because as price changes, proportionate change in market demand is more than proportionate change in individual demand.