Demand curve total market

At a given price, the sum of all the consumers demands gives the market demand for the particular product at that price. If all the consumer demand functions were known, they could be added to give the total market demand function. The total market demand curve is a plot of price p versus total amount of a given product required by all consumers Q. This function usually has a negative slope the lower the price, the greater the quantity demanded. 

It is impractical to build up a total market demand curve for a product by estimating each individual consumer demand and then adding these demands. However, a qualitative understanding of utility and elasticities combined with statistical analysis of past market behavior, projected consumer incomes, and sales of major items does permit total demand for a particular product to be estimated. The ability to arrive at such an estimate is a crucial step in projecting the profitability of a business venture in the CPI. Two approaches may be used to derive a total market demand curve. 

A typical supply-demand situation for an industry in which there is perfect competition is qualitatively illustrated in Figure 2.5a. The supply and demand curves intersect at an equilibrium price, representing a stable situation in which supply equals demand. If supply temporarily exceeds the equilibrium value, the market price will have to be lowered to sell off any excess product (step 1 in Figure 2.5b). This lowered price in turn will cause production Q to decrease in the next time period (step 2). A decrease in Q below the equilibrium point will cause a shortage and induce the price to rise (step 3), which will cause total production to increase in the next period (step 4). But this increase will in turn cause a drop in demand. This postulated cobweb process will continue until the equilibrium is reestablished. The adjustment process requires the existence of ... 

Monopoly. In a monopolistic situation one firm supplies all of a product q = Q. The firm also sets the price p, and the total market demand function provides the Q in response. Thus, dn/dQ is not zero in Eq. (2.23). One needs the function relating p and q to determine the optimum p for maximizing profits. To illustrate the operation of the monopoly firm, we assume the same total cost function as before but assume that for some reason all firms but one have dropped out of business. We also assume the following relationship for the demand curve ... 

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