Add quantities at the same price.
A market curve combines the decisions of individual buyers or sellers. At each possible price, add the quantities demanded by all buyers to obtain market demand. Separately, add the quantities supplied by all sellers to obtain market supply. This is horizontal summation: quantity is on the horizontal axis. Keep the product, location and time period consistent, and count each buyer or seller once. Repeat at other prices to construct the whole curve; one total gives only one point.
- Market demand
- Add every buyer's quantity demanded at one common price; repeat for other prices.
- Market supply
- Separately add every seller's quantity supplied at each common price.
- Keep units consistent
- Use the same product, location and time period. Add quantities, not prices.
Constructing a market schedule
Same market
Match the product specification, location and time period. Do not add weekly purchases to monthly purchases or count a reseller and final buyer as two final consumers.
Same price
Read each individual quantity at one common price, add, then repeat at other prices. Zero quantities are allowed; a market curve may have a bend where a buyer or seller begins participating.
New participants
More buyers can increase market demand; more sellers can increase market supply. Explain whose decisions are being added.
| Price | Buyer A | Buyer B | Market demand | Seller X | Seller Y | Market supply |
|---|---|---|---|---|---|---|
| $4 | 8 | 5 | 13 | 2 | 3 | 5 |
| $6 | 6 | 3 | 9 | 4 | 5 | 9 |
Worked example: Building a weekly notebook market
In this market, two buyers purchase identical notebooks from two sellers. At $4 per notebook, the buyers want 8 and 5 per week; the sellers offer 2 and 3. At $6, the buyers want 6 and 3; the sellers offer 4 and 5.
- At $4, market quantity demanded is 8 + 5 = 13 notebooks per week. Market quantity supplied is 2 + 3 = 5. These are two different totals, not a combined total of 18.
- At $6, market quantity demanded is 6 + 3 = 9. Market quantity supplied is 4 + 5 = 9. This is the equilibrium price: buyers and sellers choose the same quantity, so the market clears.
- Plot price vertically and notebooks per week horizontally. The market demand points are (13, $4) and (9, $6); the market supply points are (5, $4) and (9, $6).
- An additional buyer who wants 4 notebooks at $6 raises market quantity demanded at that price to 13. To draw the entire new demand curve, obtain that buyer's quantities at the other prices too. The market supply curve has not changed.
Watch out for this
Add the individual prices to obtain the market price.
Use one common price and add quantities. Prices are not added, and demand and supply are not added to each other. A buyer who demands zero at a price contributes zero, not a negative quantity.
Check your understanding
At $7 per notebook, three sellers offer 0, 4 and 9 notebooks per week. What is market quantity supplied at $7?
- 13 notebooks per week
- 13 notebooks at a market price of $21
- About 4.3 notebooks per week