Demand for a product or service is the most basic concept of economics and any company thinking of entering the market must first asses the demand for the good or service under question and if there sufficient demand than only it should enter the market because producing a product without demand is similar to giving oxygen to the dead body. Demand can further be classified into individual demand and market demand, in order to understand both concept better one should look at the difference between individual and market demand –
Individual Demand vs Market Demand
Meaning
Individual demand as the name suggests refers to the demand for good or service by a single individual or firm at a particular price at any given point of time while market demand refers to the total quantity of good demanded by all the consumers in the market at particular at any given point of time. In simple words when you add all the demands made by individuals you get the market demand for the given product or service.
Example
An example of individual demand will be when you go to ice cream shop and there you demand tea than chances are that only you want to drink tea at ice cream shop and hence your demand becomes individual demand if one is looking at demand for tea at ice cream shop. An example of market demand will be the demand of all other people who are eating ice cream at ice cream shop if one is looking at demand for ice cream.
Scope
The scope of individual demand is narrow as it is nothing but part of market demand which is the reason why it shows only particular picture of the market but as far as market demand is concerned its scope is wide as it covers all individual demands and hence it shows the total picture of the market with regards to product or service under question.
Dependence
Individual demand is not dependent on market demand because individual can demand whatever he or she likes just like in the above example where out of all people one individual demanded tea at ice cream shop whereas market demand is dependent on individual demand and if individual demand changes than market demand will also change, hence if all people start demanding tea at ice cream shop than ice cream shop owner will start keeping tea instead of ice creams.
Overnight Change
Individual demand can change overnight, in other words one cannot rely on individual demand if one is planning to produce good in accordance with individual demand but as far as market demand is concerned it does not change overnight rather it is a gradual process and hence it is more reliable as compared to individual demand and hence a company can rely on market demand if it is planning to produce good in accordance with market demand.
As one can see from the above that individual and market demand are different from each other and that is the reason why the company should not make the mistake of considering both the demands as one and should make their strategy accordingly.