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Individual Demand and Market Demand quiz

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  • What is individual demand?
    Individual demand is the amount of a good or service that one person is willing and able to buy at each price.
  • How is market demand calculated from individual demands?
    Market demand is calculated by summing the quantities demanded by all individuals in the market at each price.
  • If Wendy demands 3 widgets and Wally demands 5 widgets at \$1, what is the market demand at that price?
    The market demand at \$1 is 8 widgets, since 3 plus 5 equals 8.
  • What does the market demand curve represent?
    The market demand curve represents the total quantity demanded by all individuals in the market at various prices.
  • How do you add individual demand curves to get the market demand curve on a graph?
    You add individual demand curves horizontally, summing the quantities demanded at each price.
  • At a price of \$3, Wendy demands 2 widgets and Wally demands 3. What is the market demand?
    The market demand at \$3 is 5 widgets, since 2 plus 3 equals 5.
  • Why do we add demand curves horizontally instead of vertically?
    We add them horizontally because the quantity axis is horizontal, so we sum quantities at each price.
  • What happens to the quantity demanded as price increases, according to the law of demand?
    As price increases, the quantity demanded decreases for both individuals and the market.
  • If both Wendy and Wally demand 1 widget each at \$5, what is the market demand?
    The market demand at \$5 is 2 widgets, since 1 plus 1 equals 2.
  • What is the purpose of a demand schedule?
    A demand schedule lists the quantity demanded at various prices for an individual or the market.
  • How does the market demand curve illustrate aggregation of preferences?
    It shows how individual demands are combined to reflect the total market demand at each price.
  • What information do you need to construct a market demand curve?
    You need the individual demand schedules or curves for all buyers in the market.
  • If you are a company, why is market demand more important than individual demand?
    Because market demand tells you the total quantity that all consumers are willing to buy at each price, which affects your sales.
  • What does connecting the summed points on a graph of individual demands give you?
    It gives you the market demand curve.
  • What should you remember when asked to add graphs to find market demand?
    Remember to add the quantities horizontally at each price, not vertically.