Difference Between Individual Demand and Market Demand

In economics, demand refers to a consumer's willingness and ability to buy an item or service at any price point within a specific time. Despite being a consumer's wish to buy a good or service, Demand and Desire are two different things. A consumer's wish to acquire a good, even while he is unable to do so, is his desire (or want). Nonetheless, demand refers to a customer's willingness to buy a good or service, given that he is able to make the necessary purchase.

A commodity may be in demand from a single consumer or from the whole market. Thus, the concepts of Individual Demand and Market Demand came into existence.

Individual Demand: What does it mean?

Individual demand is the quantity of an item a customer is willing and able to buy at every price point within a certain time frame.

Individual Demand Schedule

A table listing the amounts of a commodity that a certain person has demanded at various price points over a given time is called an individual demand schedule.

For instance, the price per kilogram of apples and the amount that the customer request is given below:

Demand Curve

A curve that depicts the relationship between a product's price and the quantity that a single customer is willing to purchase is known as an individual demand curve. Another way to put it would be that it is a graphical depiction of each demand schedule individually. It may be created by tracking how customers behave when prices vary.

As an example, considering the above table, the curve would be drawn as follows:

Factors Affecting Individual Demand

Demand for a product may be influenced by several variables, both positive and negative. Here are these contributing factors:

1. The Cost of the Specified Good or Service

The price of a good or service is the most important factor influencing demand. There is a general rule stating that the price and demand of a good or service have an inverse connection (referred to as the Law of Demand), meaning that if a good or service's price increases, its consumer demand decreases. For example, if the price of coffee rises, fewer people will demand it because they will be less satisfied by equating its price with the degree of satisfaction they get from drinking it.

2. Cost of Related Goods

Related Products are those for which a shift in one good's price has an impact on a shift in the other good's demand.

Complementary and Substitute Goods are the two categories of related commodities.

• Substitute Goods: Items that may be substituted for one another in order to fulfill a certain need are called substitute goods. It indicates that when the cost of one product rises, the demand for its substitute good rises, and vice versa. For instance, if the price of a good, like tea, goes up, more people would want its alternative, like coffee, as it's now relatively less expensive than tea. They are also known as competitive products, as the market is driven by the desire for replacement or substitute commodities that compete with one another.
• Complementary Goods: Complementary products are those that customers utilize jointly to fulfill a certain need. Accordingly, demand for a good declines as the price of its complementary good rises, and vice versa. For instance, let's take two complementary goods, i.e., Petrol and a Car. If the price of petrol rises, customers will find it more expensive to purchase. Hence, the demand for the complementary product, a Car, would decline. Following that, people may shift to diesel or CNG based cars.

3. Consumer's Income

The consumer's income has an impact on the demand for an item as well. However, how a consumer's income influences demand depends on the specifics of the good. There are two specific types of goods, i.e., Normal goods and Inferior goods.

• Normal Commodities: These are the products for which demand rises if consumer income rises, and vice versa. For instance, a consumer's demand for luxury automobiles, cell phones, jewelry, and other items will rise in tandem with an increase in income.
• Inferior Commodities: These are commodities for which customer demand will fall when income rises and vice versa. This is the result of the consumer's increased capacity to buy high-quality goods. For instance, when a consumer's income rises, his desire for products such as canned food, old automobiles, and so on would decline since he can now afford higher-quality items.

4. Preferences and Tastings

The demand for an item is directly impacted by the tastes and preferences of the customer. It indicates that when customer tastes or preferences shift, the demand for a certain good or service changes as well. It comprises rituals, traditions, attire, and so on. For instance, customer demand for a certain clothing style will rise if it is in vogue. But, if a certain look becomes outdated, there will be less desire for it among buyers.

5. Consumer's Expectation of Change in the Price of Commodity

When a customer anticipates an item's price will rise soon, he/ she will attempt to purchase it in greater quantities now, hence driving up demand for that commodity. Put differently, the demand for a commodity in the present is directly correlated with future predictions of price fluctuations for that product. For instance, individuals may attempt to fill up their cars' tanks if they believe that the price of fuel will rise in the future, eventually leading to an increase in the demand for the fuel (petrol/diesel) at present.

Market Demand: What does it mean?

Market demand is defined as the amount of a good or service that all buyers are willing and able to purchase at all conceivable prices within a certain time frame.

Market Demand Schedule

The quantity of a commodity that consumers are willing and able to purchase in a market at various prices within a given time frame is shown in a tabular format by a market demand schedule.

For instance, the price per kilogram of sugar and the quantity that each of the four market participants-A, B, C, and D-demands are listed below.

In essence, it represents the total of each individual demand schedule, which shows the range of preferences held by various customers throughout time and at varying price points.

Demand Curve

The horizontal total of the various individual demand curves is represented graphically by the market demand curve. A company can comprehend not only certain clients but the market as a whole with the aid of market demand.

For example, using the example table, the curve would be drawn as follows:

Factors Influencing Market Demand

The market demand for a product is influenced by a number of variables in addition to those influencing the individual demand for it. Here are these contributing factors:

1. The Demographics and Size of the Population

Demand for a commodity in the market is influenced by a nation's population size. There is a direct correlation between a country's population growth and its market demand for commodities. The male-to-female and kid ratios, among other aspects of the population composition, influence the demand for a certain good or service. For example, a country's demand for goods utilized by men-like shaving cream, etc.,-will increase if its population is predominantly male.

2. Weather and Season

The market demand for an item is also influenced by local weather and seasonal factors. For instance, there is a spike in demand for ice cream, cotton clothing, and other items during the summer and a similar spike in demand for raincoats, umbrellas, and other items during the rainy season.

3. Income Distribution

The distribution of income in a nation affects a commodity's demand as well. A nation's market demand for an item will rise if its income is spread equitably. On the other hand, if the affluent and people experiencing poverty receive unequal income distribution, there will be little market demand for it.

Difference Between Individual Demand and Market Demand