ABSTRACT
Let us consider the economic plans of an individual purchaser (household or firm) for the coming period, say for the coming day. The quantity which each household will demand of a particular good A depends, as we saw in Chapter I, on the price of this good, on the prices of the other goods desired by the household, and on the level of its income. Let us suppose that the prices of all the goods with the exception of that of the good A, as well as the level of income of every household, are a fixed given quantity. Then the planned demand of each household for the good A may be taken as a function of the price of the good A, and normally the quantity demanded will decrease with a rise in price. We have already described this curve as the individual demand curve for the good concerned. By adding the individual demand functions, i.e. by adding up the individual quantities demanded at each alternative price, we obtain the total demand function for the good concerned (Fig 110). The curve DD′ is the demand curve of the households. It tells us what quantities the households altogether actually wish to buy (ceteris paribus) at a particular price. A corresponding demand curve of this “ceteris paribus” kind can, as we have shown, also be drawn up for each factor of production, from the individual demand curves of the individual entrepreneurs. We suppose that the group of demanders is facing a group of suppliers, who wish to supply and sell a fixed quantity OS per unit of time (or per day) at a price which is the same for all suppliers. The demanders are indifferent between the various suppliers. The suppliers fix the price, and the demanders decide what quantities they will buy at the price fixed.
