Quantity Demanded: Definition and Key Ideas
Quantity demanded is the amount of a good or service consumers are willing and able to buy at a specific price during a given time period. It is a single point on the demand curve that corresponds to one price–quantity combination.
Law of Demand — The Inverse Relationship
- The price of a product and the quantity demanded have an inverse relationship: as price rises, quantity demanded falls; as price falls, quantity demanded rises.
- This inverse relationship is depicted by a downward-sloping demand curve on a graph with price on the vertical axis and quantity on the horizontal axis.
Change in Quantity Demanded vs. Change in Demand
- Change in quantity demanded: movement along the same demand curve caused solely by a change in the good’s price.
- Change in demand: a shift of the entire demand curve caused by non-price factors (e.g., consumer preferences, income, prices of related goods, population, expectations).
Example:
– If hot dogs cost $5 and consumers buy two per day, the quantity demanded is two. If price rises to $6 and purchases drop to one, that’s a movement left along the demand curve (decrease in quantity demanded). If price falls to $4 and purchases rise to three, that’s a movement right (increase in quantity demanded).
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Price Elasticity of Demand
- Elasticity of demand measures how responsive quantity demanded is to price changes.
- Elastic demand: quantity demanded changes a lot when price changes (e.g., many nonessential goods).
- Inelastic demand: quantity demanded changes little when price changes (e.g., life-saving medications like insulin).
Demand Schedule and Graphing
- A demand schedule lists quantities demanded at different prices.
- Plotting the schedule produces the demand curve; each price–quantity pair is a point on that curve.
Does Quantity Demanded Apply to Services?
- Yes. Quantity demanded applies to services as well as physical goods. For example, lowering the price of portrait sessions will typically increase the number of bookings (movement along the demand curve).
Quick Takeaways
- Quantity demanded = amount consumers buy at a specific price over time.
- It depends primarily on price (movement along the demand curve).
- Non-price factors shift the whole demand curve (change in demand).
- Elasticity indicates how sensitive quantity demanded is to price changes.
Quantity demanded is a fundamental concept linking consumer behavior to price, and understanding it helps explain market responses to price changes and other economic forces.