In a market there are two consumers. Each consumer has a demand curve of P = 10–0.5q. What is the market demand curve?
Question
In a market there are two consumers. Each consumer has a demand curve of P = 10–0.5q. What is the market demand curve?
Solution
The market demand curve is derived by horizontally summing the individual demand curves of each consumer in the market.
Given that each consumer has a demand curve of P = 10 - 0.5q, the quantity demanded by each consumer for a given price can be calculated.
For two consumers with identical demand curves, the market demand at each price level is simply twice the quantity demanded by one consumer.
So, the market demand curve is:
P = 10 - 0.5Q/2
Solving for Q gives:
Q = 20 - 2P
This is the market demand curve for the two consumers.
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