How does market size affect an individual or market demand curve?

1 Answer
Sep 26, 2015

Market size results in part from market demand, which equals the sum of all individual demand curves


The market demand is the sum of each individual consumer's demand. At each price, we simply add the quantities demanded by each individual.

Market size usually refers to the number of units purchased or the dollars spent on such purchase. In either case, market size reflects the equilibrium quantity in the market -- and the equilibrium quantity is the result of the intersection of the demand curve and the supply curve.

Thus, for any given supply curve, the demand curve will determine the equilibrium quantity. As the demand curve shifts to the right (i.e., demand increases), the equilibrium quantity (i.e., market size) increases.