I n t h I s c h a p t e r y o u w I l L

demand curve.
C E T E R I S P A R I B U S
Whenever you see a demand curve, remember that it is drawn holding many
things constant. Catherine’s demand curve in Figure 4-1 shows what happens to
the quantity of ice cream Catherine demands when only the price of ice cream
varies. The curve is drawn assuming that Catherine’s income, tastes, expectations,
and the prices of related products are not changing.
Economists use the term 
ceteris paribus
to signify that all the relevant vari-
ables, except those being studied at that moment, are held constant. The Latin
phrase literally means “other things being equal.” The demand curve slopes
downward because, 
ceteris paribus,
lower prices mean a greater quantity
demanded.
Although the term 
ceteris paribus
refers to a hypothetical situation in which
some variables are assumed to be constant, in the real world many things change
at the same time. For this reason, when we use the tools of supply and demand to
analyze events or policies, it is important to keep in mind what is being held con-
stant and what is not.
M A R K E T D E M A N D V E R S U S I N D I V I D U A L D E M A N D
So far we have talked about an individual’s demand for a product. To analyze 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.
Catherine’s Demand
Price of
Ice-Cream
Cone
Price of
Ice-Cream
Cone
Nicholas’s Demand
0
1 2
3 4
5 6
7 8
9 10 11 12
Quantity of
Ice-Cream Cones
$3.00
1.50
2.00
2.50
1.00
0.50
0 1 2 3 4 5 6 7 8 9 10 11 12
Quantity of
Ice-Cream Cones
$3.00
1.50
2.00
2.50
1.00
0.50
ⴙ
d e m a n d c u r v e
a graph of the relationship between
the price of a good and the quantity
demanded
c e t e r i s p a r i b u s
a Latin phrase, translated as “other
things being equal,” used as a
reminder that all variables other than
the ones being studied are assumed
to be constant

---

C H A P T E R 4
T H E M A R K E T F O R C E S O F S U P P LY A N D D E M A N D
7 1
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.
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 
3)
Price of
Ice-Cream
Cone
0
1 2
3 4
5 6 7 8 9 10 11 12 13 14 15 16 17 18 19
Quantity of
Ice-Cream Cones
$3.00
1.50
2.00
2.50
1.00
0.50
ⴝ
F i g u r e 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.
Ta b l e 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.