The market demand curve shows the relationship between product prices in the market as a whole and its demand.
[Edit this paragraph] [principle]
We know that in a perfectly competitive product market, the market demand curve by the individual consumer demand curve is simply Transverse always getting, then we can be passed a single the manufacturers of factor demand curve simply horizontal sum to get the market demand curve? The answer is no. The reason is that we are in front of the derived demand curve are attached to certain preconditions. We derive the manufacturers demand curve, in fact, assume that when the elements of price movements in the market, the elements of other manufacturers use is constant, and thus the supply of the product unchanged, the price of the product is unchanged. When our object of study is not a single vendor, but the entire market, this assumption is clearly inappropriate.
We consider a single-factor market. Decline when the price of labor in a perfectly competitive market, all vendors will increase the use of labor, so the products in the market supply curve will shift to the right product prices fell, production was up. Product prices drop, will result in movement of the value of marginal product curve, and thus the firm 's demand curve will change. When elements of the price rise, all manufacturers to reduce the use of the elements, so the products in the market supply curve will shift to the left, so the product price increases, the marginal product of the elements of the value curve will move the demand curve of the elements followed by movement.
[Edit this paragraph] [derivation]
assumptions on the market today there are only two consumers A and B, according to the equilibrium of consumers have come to each consumer's demand curve D1 and D2, as shown in Figure 4.18 below. At this time, by adding the total in each given price the demand for A and B, the price of the market demand. For example World steel pipe network editing , when the price of P1, A consumer's demand for q11, B consumer demand for q21, market demand for Q1 = q11 + q21 description of the price P1 and market demand Q1 to the same coordinate system will be able to get a point on the market demand curve. Similarly, we can get the entire market demand curve World Pipe network informed.
[Edit this paragraph] 【Example】
if the market demand curve is Q = 120-4P, seeking P = 5 is the point of demand elasticity values, and how to adjust prices to increase in the total receipts? Point
elasticity = ((120-4p) * p) / dp = 120-8p
p = 5 pm
point elasticity = 80
point elasticity greater than 1, so to raise prices.
P = 15, the highest yielding.