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This paper proposes a modified Single-Buyer energy trading model to facilitate a Two-Stage market auction for Multiple Sellers and Multiple Buyers (MSMB) in the grid-tied Microgrid (MG) environment using the Multi-Agent System (MAS) approach. Additionally, a novel linear bidding algorithm is introduced for stakeholders (potential sellers and buyers) in the electricity market to decide their quote prices for day-ahead trading intervals. The goal of this approach is to effectively reduce overall peak demand and cost benefits for stakeholders and aggregators by utilizing distributed generation and Demand Response (DR). Moreover, a modification in the generally used DR incentive policy assures more benefit to the DR participating customers. The effectiveness of DR is validated using MATLAB/SIMULINK in a simulated grid-tied MG. The effect of DR on market clearing prices from the proposed Two-Stage market auction is demonstrated through simulation results on a test system, showing the differences before and after DR is accounted for.