CHAPTER II -- Section 5

In this brief section, Hicks discusses making the transition from analyzing individual demand to analyzing market demand.

He notes that market demand is the sum of individual demands.  Therefore, the change in market demand is the sum of changes in the individual demands.  A change in market demand due to a change in price can be divided into substitution and income effects.  The substitution effect consists of the sum of the individual substitution effects, and the income effect consists of the sum of the individual income effects.  Since all the individuals' substitution effects imply increased consumption of a good whose price falls, the market substitution effect must imply the same.  Individual income effects are not as reliably uniform in direction, therefore the group income effect must be similarly unreliable.  Finally, group income effects will tend to be negligible for any commodity on which the group spends a small proportion of its total income.