How does a market demand curve differ from a demand curve?

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boomer-sooner | College Teacher | (Level 1) Associate Educator

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The market demand curve is the summation of all the individual demand curves for a given market.  The market demand curve is creating using the individual demand curves and plotting the curve, so it includes the entire market demand for a product.  It is more relevant because of its inclusive nature.  It allows organizations to determine the entire market demand at any given price point.  An individual demand curve only shows the demand for a single entity, a person or company.  However, just because that entity does not demand the product at a certain price point does not preclude another individual from supplying the demand.

The best way to look at the relationship is with an example.  An individual demand curve for soda shows person A will pay $1 for soda, but no more.  Person B will pay $1.50 for the same soda and person C will pay $2.  Relying on any one demand curve, a company might erroneous assume demand where there is none.  The market demand curve will now show the sum of the individual curves.  Based on the example there is a demand for three sodas at $1 (because all three are willing to pay), two soda demand at $1.50 and one soda demand at $2.  The market demand curve is important because it helps the organization determine the price point that meets the greatest demand and profit.

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