Question

In: Economics

Graphically, market demand for a product: a)is the horizontal difference of the individual demand curves. b)is...

Graphically, market demand for a product:

a)is the horizontal difference of the individual demand curves.

b)is the horizontal sum of the individual demand curves.

c)is the vertical difference of the individual demand curves.

d)is the vertical sum of the individual demand curves.

Solutions

Expert Solution

Answer: The correct answer is option B i.e. horizontal sum of the individual demand curves.

Explanation: Suppose there are two individuals A and B. Then for a given price say P1 each individual will have their individual demand curves. Since the price remains the same across individuals for a particular good the only variable that varies is the quantity along horizontal axis. So we add the individual demands for each price and thus finally arrive at the market demand of a product. In other words by doing horizontal summation, a quantity demanded by all the consumers in the market is added at each price level.


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