Q.Explain the derivation of market demand curve in a hypothetical market with two consumers with the help of diagram. OR Explain the following constant elasticity demand curves, with the help of diagram.
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Start your 14-day free trial to unlock the full solution →The market demand curve is the horizontal sum of individual demand curves (add quantities at each price). OR: eD = 0 is vertical, eD = ∞ is horizontal, eD = 1 is a rectangular hyperbola.
Main question — deriving the market demand curve with two consumers:
Market demand for a good at a given price is the total quantity demanded by all consumers in the market at that price. It is obtained by horizontal summation — at each price, we add up the quantities demanded by every individual consumer.
Example with two consumers A and B:
| Price (₹) | Consumer A demand | Consumer B demand | Market demand (A + B) |
|---|---|---|---|
| 10 | 2 | 3 | 5 |
| 8 | 4 | 5 | 9 |
| 6 | 6 | 7 | 13 |
Diagram (description): Plot each consumer's demand curve (price on the Y-axis, quantity on the X-axis). Both slope downward. At each price, add the two quantities horizontally. Joining these summed points gives the market demand curve, which lies to the right of each individual curve and is flatter (more responsive), because it represents the combined demand of both consumers.
OR alternative — constant-elasticity demand curves (diagram descriptions):
| Elasticity | Shape of demand curve | Meaning |
|---|---|---|
| eD = 0 (perfectly inelastic) | A vertical straight line parallel to the Y-axis (price axis) | Quantity demanded does not change at all when price changes |
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