Market Demand

Adding up individual demands

The market demand curve is the horizontal sum of individual demand curves: at each price, add up the quantities every consumer wants. “Horizontal” because we’re summing quantities (the horizontal axis) at a given price — not summing prices.

Take two consumers with linear demands: \[ q_1(p) = \max\{0,\; a_1 - b_1 p\}, \qquad q_2(p) = \max\{0,\; a_2 - b_2 p\}. \] Market demand is \(Q(p) = q_1(p) + q_2(p)\). The interesting feature is the kink: once the price rises above the choke price of one consumer, they drop out, and from there up only the other consumer is buying — so the market curve bends and becomes steeper (less elastic) at the top.

This is why market demand is typically flatter (more price-responsive) than any single consumer’s demand: more buyers means more total adjustment for a given price change, plus the extensive margin of buyers entering and exiting.

Try it. Change each consumer’s choke price (where their demand hits zero). The thick market curve is their horizontal sum — watch the kink appear at the higher choke price, where one consumer exits.

▬ consumer 1▬ consumer 2▬ market

What to notice

  • The thick blue market curve sits to the right of each individual curve — at any price, total quantity exceeds what either buyer wants alone.
  • Above the lower choke price, that consumer is gone and the market curve kinks to follow only the remaining buyer — steeper, less elastic.
  • Move the price below both choke prices and both consumers are active; the market curve is flatter there because two buyers adjust to each price change.