There are 20 consumers of a good, each with the demand curve \( d(p) = 10 - 3p \) for any price up to \( \displaystyle\frac{10}{3} \), and zero at any higher price. Which of the following statements are correct?
(A) At a price of 3, the market demand is 20 units.
(B) At a price of 2, the market demand is 80 units.
(C) At a price of 1, the market demand is 7 units.
(D) At a price of 4, the market demand is 0 units.
(E) The market demand curve is found by adding the individual demand curves vertically.
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → (A), (B) and (D) only
Market demand at a price is the sum of all consumers’ demands at that price. With 20 identical consumers, market demand = 20 × (10 − 3p), for any price up to 10/3.
(A) At a price of 3, the market demand is 20 units. — Correct. 20 × (10 − 9) = 20 × 1 = 20.
(B) At a price of 2, the market demand is 80 units. — Correct. 20 × (10 − 6) = 20 × 4 = 80.
(C) At a price of 1, the market demand is 7 units. — Incorrect. 7 is one consumer’s demand; the market demand is 20 × 7 = 140.
(D) At a price of 4, the market demand is 0 units. — Correct. 4 is above 10/3, where each consumer demands nothing.
(E) The market demand curve is found by adding the individual demand curves vertically. — Incorrect. The curves are added horizontally: quantities are added at each price.
NCERT (2026-27): “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. … 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. If there are more than two consumers in the market for a good, the market demand can be derived similarly. The market demand curve of a good can also be derived from the individual demand curves graphically by adding up the individual demand curves horizontally as shown in Figure 2.18. This method of adding two curves is called horizontal summation.” |