Question

What is the market demand curve of demand curves of different individuals?

• A. Sum
• B. Horizontal summation
• C. Difference
• D. Both (A) and (B)

Hint:

To construct the market demand curve, horizontally sum the individual demand curves at each price level.

Answer 1

The Correct Option is D

Step 1: Understanding the market demand curve.
The market demand curve represents the total quantity demanded by all individuals in the market at each price level. To construct the market demand curve, we sum the individual demand curves horizontally, as this method adds the quantities demanded by all individuals at each price.

Step 2: Analyzing the options.
(A) Sum: This refers to the addition of individual demands, but it’s not the most specific term.
(B) Horizontal summation: Correct. The market demand curve is obtained by horizontally summing the individual demand curves, meaning that the quantities demanded at each price level are added together.
(C) Difference: This is incorrect. The market demand curve is constructed by summing, not by taking the difference.
(D) Both (A) and (B): Correct. Both the sum and horizontal summation refer to the same concept of combining individual demands.

Step 3: Conclusion.
The correct answer is (D) Both (A) and (B), as the market demand curve is formed by the horizontal summation (or sum) of individual demand curves.