Economics, 3rd Edition

R

R

h

h

l’

l’

D

D

d

d

S

FIGURE 3.1

Price of milk

per litre (

€)

Quantity of milk

demanded (litres)

1.00

0.90

0.80

1. A decrease

   in price ...

0.70

0.50

0.40

0.30

0.20

0.10

0

2

4

6

8

10

12

14

16

18

20

0.60

2. ... increases quantity

    of milk demanded

Market Demand versus Individual Demand

The demand curve in Figure 3.1 shows an individual’s demand for a product. To analyse how markets 

work, we need to determine the market demand, which is the sum of all the individual demands for a 

particular good or service.

The table in Figure 3.2 shows the demand schedules for milk of two individuals – Rachel and Lars. 

At any price, Rachel’s demand schedule tells us how much milk she would like to buy and Lars’ demand 

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CHAPTER 3  THE MARKET FORCES OF SUPPLY AND DEMAND  45