yego.me
💡 Stop wasting time. Read Youtube instead of watch. Download Chrome Extension

Market demand as the sum of individual demand | APⓇ Microeconomics | Khan Academy


3m read
·Nov 11, 2024

In this video, we're going to think about the market for apples. But the more important thing isn't the apples; it's to appreciate that the demand curves for a market are really the sum of the individual demand curves for every member of that market. Most markets will have many tens or hundreds of thousands of actors in it—maybe millions or tens of millions of actors in it.

But for the sake of simplifying things, we're going to assume that the apple market has only two buyers, and we have their demand curves right over here. This demand curve for buyer one, and this is the demand curve for buyer two. If the vertical axis is price, and maybe this is the price of apples per pound, and quantity—let's just say that's pounds per time period, maybe pounds per week—we can see that from buyer one's demand curve, at a price of one, two, three, four, five dollars per pound, they don't want to buy any pounds.

At a price of three dollars per pound, they're willing to buy one pound per week, and at a price of one dollar per pound, they're willing to buy two pounds per week. We can similarly look at the demand curve for buyer two. Sometimes you'll see this in table form when it's called a demand schedule, but you can see it one, two, three, four, five, six, seven. At seven dollars, buyer two is not interested in apples.

At five dollars a pound, they are interested in buying two pounds of apples per week. At three dollars per pound, they're interested in buying—let's see, this is one, two, three, four, five pounds per week, and at one dollar per pound, they're interested in buying six, seven, eight pounds per week.

So based on this data here, buyer one and buyer two are the only individuals in this market; once again, a huge oversimplification. What would the market demand curve look like? Pause this video and try to think that through.

Well, if we go to the various prices—at a price of seven dollars, there is not going to be any interest in any apples, so I could maybe put that right over there at a price of seven dollars. But what happens is the price goes down, and we could just sample what happens when we get to a price of five dollars. Buyer one is still not interested, but buyer two is now willing to buy two pounds per week.

So at a price of five dollars, the market as a whole is willing to buy two pounds from buyer two and zero pounds from buyer one. We'll have a total of two pounds, so right over there, that is at five dollars per pound. The market is willing to demand a quantity of two pounds per week.

Then let's go to three dollars. At three dollars, now buyer one would buy one pound per week, and buyer two would buy five pounds per week. So in total, there would be six pounds demanded, or the quantity demanded would be six pounds. So at three dollars, the quantity demanded is three, four, five, six, so that would put us right about there.

Then last but not least, once again I'm just sampling these points to make the point to you that we really would just add—we would take the sum of these two curves—but we're kind of stacking them horizontally as opposed to vertically because for any given price, we're adding up the quantities.

So let's go to one dollar a pound. At one dollar a pound, buyer one is willing to buy two pounds, and at one dollar a pound, buyer two is willing to buy eight pounds. You put those together: two plus eight, you get ten pounds.

So this was two, three, four, five, six, seven, eight, and then nine and ten. We're going a little bit off the screen here; I could have planned better for it. But let me go all the way over here, so I'll extend my axis—so that's nine, and then this is ten.

So at one dollar, the market would be willing to buy ten pounds per week. You could sum at any other point or any other points in between, and what you would do is you would get a market demand curve that looks a little something like this.

You can see visually what has happened here: for any price value, we are summing the quantities for all of the buyers in the market. Now here, there are only two buyers. Now, if you're doing this in the real world, you might be dealing with millions of buyers, but this is just to understand how a market—or where a market demand curve—is actually coming from.

More Articles

View All
Reasons To Stop Worrying (Break The Habit of Excessive Thinking)
The ability to plan for the future is a cornerstone of our civilization. The human race would never have flourished if we didn’t organize, arrange, design, prepare, and delay gratification for greater causes. Take, for example, this structure: the Kölner…
INFLATION WARNING: The 2020 DEBT Bubble Explained
What’s up guys, it’s Graham here! So, I want to take some time to address a recurring comment and concern that’s been showing up a lot on my channel lately, and that would be: Is Carole Baskin guilty? And did she do it? To which I say, possibly. But I th…
Using Fire to Make Tools | The Great Human Race
On this journey, we need to carry grains, milk, water, processing number materials directly on a fire. So, I want to make some clay pots. Prior to the invention of pottery, our ancestors used organic containers such as animal stomachs and baskets to store…
15 Steps to GET RICH (Ultimate Guide)
You are watching the Sunday motivational video: 15 steps to get rich. Welcome to a Luxe Calm, the place where future billionaires come to get inspired. If you’re not subscribed yet, you’re missing out! Hello, Alex Aires! We are glad to have you here with…
Solving the Mystery of the Boiling River | Podcast | Overheard at National Geographic
My grandfather, my dad’s dad, he was just a really fantastic storyteller. There’s just one story that he would tell about Paititi. Paititi is in Peru, what we call El Dorado, right? The golden city. So imagine this big mysterious city made entirely of gol…
What is love?
I love a lot of things. Some people love sunshine and rainbows. Some love the warmth of summer and the chill of winter. Others love the smell of hot coffee in the morning and the coziness of their bed at night. Some love to travel and go on crazy adventur…