Principles of Economics- Mankiw (5th) 67

Principles of Economics- Mankiw (5th) 67 - Figure 4-2 shows...

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CHAPTER 4 THE MARKET FORCES OF SUPPLY AND DEMAND 71 Table 4-2 shows the demand schedules for ice cream of two individuals— Catherine and Nicholas. At any price, Catherine’s demand schedule tells us how much ice cream she buys, and Nicholas’s demand schedule tells us how much ice cream he buys. The market demand is the sum of the two individual demands. Because market demand is derived from individual demands, it depends on all those factors that determine the demand of individual buyers. Thus, market de- mand depends on buyers’ incomes, tastes, expectations, and the prices of related goods. It also depends on the number of buyers. (If Peter, another consumer of ice cream, were to join Catherine and Nicholas, the quantity demanded in the market would be higher at every price.) The demand schedules in Table 4-2 show what happens to quantity demanded as the price varies while all the other variables that determine quantity demanded are held constant.
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Unformatted text preview: Figure 4-2 shows the demand curves that correspond to these demand sched-ules. Notice that we sum the individual demand curves horizontally to obtain the Market Demand ( ± 4 ² 3) Price of Ice-Cream Cone 0 1 2 3 4 5 6 7 8 9 10 11 12 1314 1516 17 1819 Quantity of Ice-Cream Cones $3.00 1.50 2.00 2.50 1.00 0.50 ± Figure 4-2 M ARKET D EMAND AS THE S UM OF I NDIVIDUAL D EMANDS . The market demand curve is found by adding horizontally the individual demand curves. At a price of $2, Catherine demands 4 ice-cream cones, and Nicholas demands 3 ice-cream cones. The quantity demanded in the market at this price is 7 cones. Table 4-2 I NDIVIDUAL AND M ARKET D EMAND S CHEDULES . The quantity demanded in a market is the sum of the quantities demanded by all the buyers. P RICE OF I CE-C REAM C ONE C ATHERINE N ICHOLAS M ARKET $0.00 12 ² 7 ± 19 0.50 10 6 16 1.00 8 5 13 1.50 6 4 10 2.00 4 3 7 2.50 2 2 4 3.00 1 1...
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