Demand Price

Earlier economic literature doubtless contains casual usages of the phrase ‘demand price’, but its appropriation as a technical term appears to date from Alfred Marshall’s Principles of Economics (Marshall 1890: see Marshall 1920, pp. 95–101). Marshall applied the term in the contexts of both individual and market demand. Starting with a commodity (tea) purchasable in integral units of a pound’s weight, an individual’s demand price for the x th pound is the price he is just willing to pay for it given that he has already acquired x − 1 pounds. The basic assumption is that this demand price is lower the larger is x. A schedule of demand prices for all possible quantities (values of x ) defines the consumer’s demand schedule. Its graph is naturally drawn with quantity on the horizontal axis. In the case of a perfectly divisible commodity, the demand price of quantity x must be redefined as the price per unit which the consumer would be willing to pay for a tiny increment, given that he already possesses amount x. The demand schedule then graphs as a continuous negatively-sloped demand curve showing demand price in this sense as a function of x. These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.