Difference Between Individual Demand and Market Demand (with Factors, Examples and Comparison Chart) - Key Differences (2022)

Based on the number of consumers, demand is classified as individual demand and market demand. Individual demand implies, the quantity of good or service demanded by an individual household, at a given price and at a given period of time. For example, the quantity of detergent purchased by an individual household, in a month, is termed as individual demand.

Unlike Market Demand implies the sum total of all individual demand for the commodity at each possible price, over a period of time. For example, There are 10 consumers of detergent in the market, wherein their monthly demand for detergent is 10kg, 5kg, 4kg, 6kg, 5kg, 3kg, 7kg, 12kg, 6kg and 4 kg respectively. So, the market demand for detergent is 62kg.

What is Demand?

In economics, demand is the desire for the commodity supported by the willingness of the consumer to spend money to buy that commodity and the ability (in terms of money) of the consumer to get the commodity.

Demand Curve

On a graph, one can draw the demand curve for any commodity by plotting the various combinations of price and demand, wherein price will be an independent variable and is taken on Y-axis, whereas quantity demanded will be a dependent variable which is plotted on X-axis.

In this written account, we will talk about the differences between individual demand and market demand.

Content: Individual Demand Vs Market Demand

  1. Comparison Chart
  2. Definition
  3. Key Differences
  4. Factors Affecting Individual Demand and Market Demand
  5. Example
  6. Conclusion

Comparison Chart

Basis for ComparisonIndividual DemandMarket Demand
MeaningIndividual Demand implies the quantity demanded of a commodity by a single potential consumer, firm, or household, at different price levels, and during a given period.Market demand for a commodity refers to the aggregate quantity of the commodity demanded by all the potential consumers in the market at different price levels, over a certain period.
CurveDepicts the relationship between quantity demanded by a single consumer, as we change the price.Depicts the relationship between the total quantity demanded and the market price of the goods.
Inter-RelationshipComponent of Market Demand.Summation of Individual demand of all buyers.
Demand curve appearsSteeperRelatively flatter
Law of DemandIt does not always follow the law of demandIt always follows the law of demand.

Definition of Individual Demand

Individual Demand implies the quantity of a good or service which an individual is willing to buy at a certain price over a period of time, i.e. per week, per month or per year. In simple words, Individual demand is the demand for a commodity by an individual buyer.

(Video) Difference between Individual and Market Demand

The individual demand for the product is commonly affected by the price of the commodity, income of the consumer, and taste and preferences, etc.

Individual Demand Schedule

An individual demand schedule is a tabular representation of the list of quantities of a commodity demanded by an individual at different price levels, during a certain period of time.

For Example, Given are the price per kg of oranges and the quantity demanded by a consumer.

Individual Demand Curve

An individual demand curve represents the quantity demanded by the individual household at various prices. We can also say that it is the graphical representation of the individual demand schedule. It can be constructed by observing consumer behaviour when there is a change in price.

For Example: Considering the above example, the curve will be drawn as follows:
Also Read: Difference Between Demand and Supply

Definition of Market Demand

Market Demand refers to the sum total of the individual demands of all the consumers for a commodity in a market over a period of time, at given prices, other factors being constant.

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

Market Demand Schedule

A market demand schedule is a tabular representation indicating how much quantity of a commodity the consumers are willing and able to buy in a market at different prices, during a specified period of time. Basically, it is a sum of the individual demand schedules, indicating the preference scale of different consumers taken together, at different price levels.

For Example: Given are the price per kg of sugar and the quantity demanded by all four consumers in the market – A, B, C and D.

Market Demand Curve

The market demand curve graphically indicates the horizontal sum of the individual demand curves. With the help of market demand, the firm can understand the entire market and not just individual customers.

For Example: Considering the above example, the curve will be plotted as under:

Also Read: Difference Between Demand and Quantity Demand

Key Differences Between Individual Demand and Market Demand

After understanding their concept, come let’s have a look at the difference between individual demand and market demand:

(Video) Individual Demand Vs Market Demand class Xl Economics

  1. Individual demand connotes the quantity demanded by a single consumer, for any given product, at any given price, at any point in time. On the other hand, market demand is the aggregate quantity that all the consumers of a commodity are willing and able to buy at a point of time, in a market at different possible prices.
  2. Both Individual Demand Curve and Market Demand Curve have a negative slope, i.e. from left to right showing an indirect functional relationship between the price of the commodity and the quantity demanded. Other things being constant, an individual demand curve showcases the relationship between quantity demanded by a single consumer, as we change the price. Conversely, the market demand curve indicates the relationship between the total quantity demanded and the market price of the goods.
  3. While individual demand is a component of market demand. On the other hand, market demand is the summation of all individual demand of all consumers.
  4. The market demand curve is flatter in comparison to the individual demand curve.
  5. Individual demand does not always follow the law of demand whereas market demand always follows the law of demand. As per the law of demand, when there is an increase in the price of the commodity, the quantity demanded will decrease.

Factors Affecting Individual Demand and Market Demand

Behind a buying decision of an individual, there are a number of factors involved. However, there are some common factors which affect both individual demand and market demand. And there are some factors which affect market demand only. So, first of all we are going to discuss those factors which affect both:

  • Price of a Commodity: The price of a commodity plays a crucial role in determining the demand for a commodity. It has an inverse relationship with demand, which means that when the price of good increases, demand falls, and when the prices are reduced, the quantity demanded of that product increases.
  • Price of Related Goods: The term ‘related goods’ is used in the context of substitute goods and complementary goods. The demand for the good is not just based on its own prices, but on the other goods which are related to it. Here, goods are considered as related when the change in the price of one commodity, influences the demand for another commodity.
    • Substitute Goods: Goods that are used to fulfil or satisfy the same purpose or want are called substitute goods or competing goods, For example bulb and tube light, Cooler and AC, etc.
    • Complementary Goods: Complementary Goods are the goods that have joint demand, i.e. such goods are consumed together. Hence, the rise in the prices of one commodity leads to a fall in the prices of another. For example shoes and socks.
  • Income of consumer: We all know that the level of income of a consumer determines its purchasing power. That is why there is a direct relationship between the demand for the product and the income of the consumer. So, when the income of the consumer rises, the demand for the product will also rise and vice versa.
  • Tastes and Preferences of Consumers: Demand for commodity changes with the change in tastes and preferences of the consumer, depending on the fashion, traditions, beliefs, habits, trends, customs and lifestyles.
  • Consumer’s expectations: Consumer’s expectations with respect to the future price and availability of goods and services, and changes in income, which may result in a sudden rise or fall in demand.
  • Advertising: Nowadays, advertising and media, be it electronic, paper-based or social, play a key role in influencing the lifestyle of the consumers. An aggressive advertising campaign often increases the demand for a particular commodity. Thus it shifts the demand curve to the right.
  • Credit Policy: Credit policy of the company relating to the terms and conditions, to provide various commodities on credit. As well as the bank’s credit policy also affects the demand for commodities. This implies that if the credit policies and interest rates are favourable, the consumers may purchase those commodities which they may not have purchased otherwise.

The factors which only affect market demand for the commodity are:

  • Size and Composition of Population: When there is an overall increase in the size of the population, it leads to an increase in the demand for the commodity, due to the increase in the number of consumers. Further, the composition of the population affects the demand for commodities, as the demand for the commodity is primarily based on the age, sex and race of the population. Therefore, the composition of the population will decide the pattern of market demand.
  • Income Distribution: Income distribution indicates the way national income is divided among various groups, classes, factors of production, etc. When the distribution of income is unequal, it may lead to a difference in the income status of different individuals in a country. So, people belonging to the rich class would have higher purchasing power, as compared to the poor class, which results in higher demand for the commodity among rich but less amongst poor. More even income distribution implies more market demand.
  • Climatic and seasonal factors: Climatic or seasonal conditions of a region also affects demand for the commodities, such as the demand for coolers, air conditioner, ice cream and cold drinks are high in summer as compared to winters.
  • Government Policy: Taxation level, budget, the supply of money and interest rate, also affect the demand for the commodities For example, when the government increases VAT on petrol, it ultimately increases its price, which results in the fall in their demand.

Example

Individual Demand

When the price of apples is Rs. 60 per kg, Amar purchases 3 kg apples for a week. And when the price rises to Rs. 80 per kg, he buys 2 kg apples for the week, but when the price reduced to 40 Rs per kg, he buys 4 kg apples. This will be shown in the table below:

Now, take a look at the individual demand curve, considering quantity demanded of apples by Amar at different price levels.

Market Demand

(Video) Movement Vs Shift in Demand Curve: Difference between them with examples & comparison chart

Suppose there are three buyers of apples in a market – Amar, Ali and Alex. The market demand will be the aggregate of individual demand schedules of the given buyers. This will be shown in the table below:

Let us take a look at the market demand curve, considerating the total quantity demanded by all the consumers at different prices.


Conclusion

In a nutshell, we can say that individual demand for the commodity is not the same as market demand. Further, individual demand is not influenced by all the factors affecting market demand.

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(Video) Constructing individual and market demand curves

FAQs

What is the difference between individual demand and market demand? ›

Individual demand is influenced by an individual's age, sex, income, habits, expectations and the prices of competing goods in the marketplace. Market demand is influenced by the same factors, but on a broader scale – the taste, habits and expectations of a community and so on.

What are the factors influencing individual demand and market demand? ›

The demand for a good depends on several factors, such as price of the good, perceived quality, advertising, income, confidence of consumers and changes in taste and fashion. We can look at either an individual demand curve or the total demand in the economy.

What is major difference between individual demand schedule and market demand schedule? ›

Individual demand schedule is a tabular representation of quantity of goods demanded by an individual consumer at different prices during a given period of time. Market demand schedule is a tabular representation of total quantity of goods demanded by all consumers at different prices during a given period of time.

What is the biggest difference between individual and market demand curves? ›

Hi there welcome to an introductory. As micro revision video on the difference between individual

What is individual demand and example? ›

Individual demand implies, the quantity of good or service demanded by an individual household, at a given price and at a given period of time. For example, the quantity of detergent purchased by an individual household, in a month, is termed as individual demand.

What is an example of market demand? ›

Examples of Market Demand

A store which sells 1000 soaps daily, has a demand of 1000 soaps. But on weekends, when the number of shoppers increases, the demand might be 1200. This is just the demand of one store.

What are the factors affecting market demand? ›

Market factors affecting demand of consumer goods
  • Price of product.
  • Tastes and preferences.
  • Consumer's income.
  • Availability of substitutes.
  • Number of consumers in the market.
  • Consumer's expectations.
  • Elasticity vs. inelasticity.

What are the 7 factors of demand? ›

7 Factors which Determine the Demand for Goods
  • Tastes and Preferences of the Consumers: ...
  • Incomes of the People: ...
  • Changes in the Prices of the Related Goods: ...
  • The Number of Consumers in the Market: ...
  • Changes in Propensity to Consume: ...
  • Consumers' Expectations with regard to Future Prices: ...
  • Income Distribution:

What are the 4 factors of demand? ›

The quantity demanded (qD) is a function of five factors—price, buyer income, the price of related goods, consumer tastes, and any consumer expectations of future supply and price.

What is the relationship between individual demand and market demand? ›

The market demand for a good describes the quantity demanded at every given price for the entire market. Remember that the entire market is made up of individual buyers with their own demand curves. This means that the market demand is the sum of all of the individual buyer's demand curve.

What is the difference between individual and market supply? ›

The major difference in both terms is that Individual supply refers to the quantity supplied by the single seller whereas Market supply refers to the quantity supplied by all sellers in the market.

What is individual demand curve with diagram? ›

The individual demand curve is drawn on a diagram with the price of a good on the vertical axis and the quantity demanded on the horizontal axis. It is drawn for a given level of income. We must be careful to distinguish between movements along the demand curve and shifts in the demand curve.

What is individual and market demand function? ›

The market demand function represents the total quantity of a good demanded by all individuals at each price. It is derived by summing up horizontally the demand curve of each consumer. For each price, the quantity demanded by each consumer is added up horizontally to derive the total quantity demanded in the market.

What is an individual demand? ›

Individual demand refers to the demand for a good or a service by an individual (or a household). Individual demand comes from the interaction of an individual's desires with the quantities of goods and services that he or she is able to afford. By desires, we mean the likes and dislikes of an individual.

How are individual and market demand schedules similar? ›

How are individual and market demand schedules similar? The both show demand at each and every price for a good or service. How are they different? One represents an individual demand and the market shows all customers that are interested in the good or service at each and every price.

What is a market demand? ›

Market demand is how much consumers want a product for a given period of time. Market demand is determined by a few factors, including the number of people seeking your product, how much they're willing to pay for it, and how much of your product is available to consumers, both from your company and your competitors.

What is a market demand curve? ›

The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity demanded for a given period of time. In a typical representation, the price will appear on the left vertical axis, the quantity demanded on the horizontal axis.

How do you find market demand on a graph? ›

The market demand curve is obtained by adding together the demand curves of the individual households in an economy. As the price increases, household demand decreases, so market demand is downward sloping. The market supply curve is obtained by adding together the individual supply curves of all firms in an economy.

What are the different types of demand in marketing? ›

Types of market demand
  • Negative demand. ...
  • Unwholesome demand. ...
  • Non-existing demand. ...
  • Latent demand. ...
  • Declining demand. ...
  • Irregular demand. ...
  • Full demand. ...
  • Search engine optimization tools.

What is the importance of market demand? ›

Researching market demand for your industry or sector is hugely beneficial for gathering key takeaways for your business such as pricing, managing inventory, forecasting, gathering information about customer response to certain products or services, and estimating how profitable your industry has the potential to be.

What are different types of demand? ›

The following list details seven types of demand in economics:
  • Joint demand. Joint demand is the demand for complementary products and services. ...
  • Composite demand. ...
  • Short-run and long-run demand. ...
  • Price demand. ...
  • Income demand. ...
  • Competitive demand. ...
  • Direct and derived demand.

What are the 10 factors that affect demand? ›

10 Determinants of Demand for a Product
  • Following are the determinants of demand for a product:
  • i. Price of a Product or Service:
  • ii. Income:
  • The relationship between the income of a consumer and each of these goods is explained as follows:
  • a. Essential or Basic Consumer Goods:
  • b. Normal Goods:
  • c. Inferior Goods:
  • d.

What are the 8 factors that affect demand? ›

8 Factors Influencing the Demand of a Commodity
  • (i) Price of the commodity itself:
  • (ii) Prices of other related goods:
  • (iii) Level of income of the consumer:
  • (iv) Tastes and Preferences of the Consumer:
  • (v) Population:
  • (vi) Income Distribution:
  • (vii) State of trade:
  • (viii) Climate and weather:

Which of the following factor affects the market demand for a good and not its individual demand for the good? ›

Own price of the given commodity: Own price is the most important determinant of demand.

What are the 6 factors that affect demand? ›

6 Important Factors That Influence the Demand of Goods
  • Tastes and Preferences of the Consumers: ADVERTISEMENTS: ...
  • Income of the People: ...
  • Changes in Prices of the Related Goods: ...
  • Advertisement Expenditure: ...
  • The Number of Consumers in the Market: ...
  • Consumers' Expectations with Regard to Future Prices:

Which factors affect supply? ›

Factors affecting supply

There are many factors affecting the supply of a commodity in the market including input costs, price of the commodity, the state of technology at a given time, taxation, prices of other goods, objective of the seller, number of firms selling the same commodity among others.

What four factors affect the demand of a product? ›

The various factors affecting demand are discussed below:
  • Price of the Given Commodity: It is the most important factor affecting demand for the given commodity. ...
  • Price of Related Goods: ...
  • Income of the Consumer: ...
  • Tastes and Preferences: ...
  • Expectation of Change in the Price in Future:

What are the main determinants of individual demand? ›

Determinants of individual demand are the cost of related goods and services, cost of the commodity, income of the consumer, number of consumers in the market, and consumer expectation. The cost of goods and services is a common determinant of demand and supply.

What two factors are necessary for demand? ›

The demand for a good or service depends on two factors: (1) its utility to satisfy a want or need, and (2) the consumer's ability to pay for the good or service. In effect, real demand is when the readiness to satisfy a want is backed up by the individual's ability and willingness to pay.

What do you understand by individual demand and market demand why the demand curve shifts? ›

Individual Demand Curve: the relationship between the quantity of a product a single consumer is willing to buy and its price. Market Demand Curve: the relationship between the quantity of a product that all consumers in the market are willing to buy and its price.

How is a market demand curve different from an individual demand curve quizlet? ›

A market demand curve shows the quantities demanded by all consumers, and an individual demand curve shows the quantities demanded by one consumer.

What is the difference between the market demand and market supply? ›

The market demand gives the quantity purchased by all the market participants—the sum of the individual demands—for each price. This is sometimes called a “horizontal sum” because the summation is over the quantities for each price. The market supply is the horizontal (quantity) sum of all the individual supply curves.

What's the difference between an individual supply curve and a market supply curve? ›

The individual supply curve shows the small quantity of supply for a commodity but the market supply curve shows the large volume of quantity supply of a commodity.

What is the difference between an individual supply schedule and a market supply schedule? ›

the difference is that an individual supply schedule shows this relationship for a specific good/service, whereas a market supply schedule shows the relationship supplied by all firms in a particular market.

How do you find market demand from individual demand? ›

How to Derive Market Demand from Individual Consumers' Demand

How do you find the market demand function from individual demand functions? ›

The market demand curve for good X is found by summing together the quantities that both consumers demand at each price. For example, at a price of $1, Consumer 1 demands 2 units while Consumer 2 demands 1 unit; so, the market demand is 2 + 1 = 3 units of good X.

What is the relationship between individual demand and market demand? ›

The market demand for a good describes the quantity demanded at every given price for the entire market. Remember that the entire market is made up of individual buyers with their own demand curves. This means that the market demand is the sum of all of the individual buyer's demand curve.

What is the difference between individual and market supply? ›

The major difference in both terms is that Individual supply refers to the quantity supplied by the single seller whereas Market supply refers to the quantity supplied by all sellers in the market.

What is a individual demand? ›

Individual demand refers to the quantity of the commodity that a consumer is able and willing to buy at each possible price during a given period of time.

What is the market demand? ›

Market demand is the total quantity demanded by all consumers in a market for a given good. Aggregate demand is the total demand for all goods and services in an economy. Multiple stocking strategies are often required to handle demand.

What is individual demand curve with diagram? ›

The individual demand curve is drawn on a diagram with the price of a good on the vertical axis and the quantity demanded on the horizontal axis. It is drawn for a given level of income. We must be careful to distinguish between movements along the demand curve and shifts in the demand curve.

What is individual and market demand function? ›

The market demand function represents the total quantity of a good demanded by all individuals at each price. It is derived by summing up horizontally the demand curve of each consumer. For each price, the quantity demanded by each consumer is added up horizontally to derive the total quantity demanded in the market.

How are individual and market demand schedules similar? ›

How are individual and market demand schedules similar? The both show demand at each and every price for a good or service. How are they different? One represents an individual demand and the market shows all customers that are interested in the good or service at each and every price.

What is the difference between the market demand and market supply? ›

The market demand gives the quantity purchased by all the market participants—the sum of the individual demands—for each price. This is sometimes called a “horizontal sum” because the summation is over the quantities for each price. The market supply is the horizontal (quantity) sum of all the individual supply curves.

What's the difference between an individual supply curve and a market supply curve? ›

The individual supply curve shows the small quantity of supply for a commodity but the market supply curve shows the large volume of quantity supply of a commodity.

What is market supply example? ›

Figure 8.4 "Market Supply" shows an example with two firms. At $3, firm 1 produces 7 bars, and firm 2 produces 3 bars. Thus the total supply at this price is 10 chocolate bars. At $5, firm 1 produces 8 bars, and firm 2 produces 5 bars.

What are the factors affecting individual demand? ›

Effects of Advertisement and Sales Propaganda.
  • Factor # 1. Price of the Commodity: ...
  • Factor # 2. Income of the Purchaser: ...
  • Factor # 3. Person's Taste's and Habits: ...
  • Factor # 4. Substitutes and Complementary Products and their Relative Prices: ...
  • Factor # 5. Consumer's Expectation About the Future Change in Price: ...
  • Factor # 6.

What are the main determinants of individual demand? ›

Determinants of individual demand are the cost of related goods and services, cost of the commodity, income of the consumer, number of consumers in the market, and consumer expectation. The cost of goods and services is a common determinant of demand and supply.

What are different types of demand? ›

The following list details seven types of demand in economics:
  • Joint demand. Joint demand is the demand for complementary products and services. ...
  • Composite demand. ...
  • Short-run and long-run demand. ...
  • Price demand. ...
  • Income demand. ...
  • Competitive demand. ...
  • Direct and derived demand.

What are examples of a market? ›

A market is a place where buyers and sellers can meet to facilitate the exchange or transaction of goods and services. Markets can be physical like a retail outlet, or virtual like an e-retailer. Other examples include illegal markets, auction markets, and financial markets.

What is market demand diagram? ›

The market demand curve is the summation of all the individual demand curves in the market for a particular good. It shows the quantity demanded of the good at varying price points. Because quantity demanded decreases as price increases, the market demand curve has a negative, or downward, slope.

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