Two consumers, A and B, value successive units of a good in rupees as shown. Each buys a unit only if it is worth at least its price to her.
| Unit | 1st | 2nd | 3rd | 4th |
|---|---|---|---|---|
| A | Rs 40 | Rs 30 | Rs 20 | Rs 10 |
| B | Rs 35 | Rs 25 | Rs 15 | Rs 5 |
What is the market demand for the good at a price of Rs 22 and at a price of Rs 12?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → 4 units and 6 units
Each consumer buys a unit only while it is worth at least the price to her. Market demand is the sum of the two demands at each price.
At a price of Rs 22:
A buys the units worth Rs 40 and Rs 30 = 2 units
B buys the units worth Rs 35 and Rs 25 = 2 units
Market demand = 2 + 2 = 4 units
At a price of Rs 12:
A buys the units worth Rs 40, Rs 30 and Rs 20 = 3 units
B buys the units worth Rs 35, Rs 25 and Rs 15 = 3 units
Market demand = 3 + 3 = 6 units
NCERT (2026-27): “2.1.1 Cardinal Utility Analysis … An explaination for a downward sloping demand curve rests on the notion of diminishing marginal utility. The law of diminishing marginal utility states that each successive unit of a commodity provides lower marginal utility. … Therefore the individual will not be willing to pay as much for each additional unit and this results in a downward sloping demand curve. At a price of Rs. 40 per unit x, individual’s demand for x was 5 units. The 6th unit of commodity x will be worth less than the 5th unit. The individual will be willing to buy the 6th unit only when the price drops below Rs. 40 per unit. …” “2.5 Market Demand … The market demand for a good at a particular price is the total demand of all consumers taken together. The market demand for a good can be derived from the individual demand curves. Suppose there are only two consumers in the market for a good. Suppose at price p′, the demand of consumer 1 is q′1 and that of consumer 2 is q′2. Then, the market demand of the good at p′ is q′1 + q′2. Similarly, at price ˆp , if the demand of consumer 1 is 1ˆq and that of consumer 2 is 2 ˆq , the market demand of the good at ˆp is 1 2 ˆ ˆ q q + . Thus, the market demand for the good at each price can be derived by adding up the demands of the two consumers at that price. …” |