What is Quantity Demanded

Quantity demanded is a term used in economics to describe the total amount of goods or services demanded at any given point in time. It depends on the price of a good or service in the marketplace, regardless of whether that market is in equilibrium. The degree to which the quantity demanded changes with respect to price is called the elasticity of demand.

Assuming non-price factors are removed from the equation, a higher price results in a lower quantity demanded, and the opposite is true as well: A lower price increases the quantity demanded. Therefore, quantity demanded is directly related to the law of demand, which states the price and demand are inversely related.


Quantity Demanded

BREAKING DOWN Quantity Demanded

An Example of Quantity Demanded

Say, for example, at a price of $5, the quantity demanded for hot dogs is two. Using a standard demand curve, the quantity demanded is depicted as a point on the downward sloping line, with the price of hot dogs on the Y-axis and the quantity of hot dogs on the X-axis. This means that as price decreases, the quantity demanded increases.

Any change or movement to quantity demanded is depicted as a movement of the point along the demand curve and not a shift in the demand curve itself. The demand curve effectively remains static. So, if vendors decide to increase the price of a hot dog to $6, the quantity demanded moves up the demand curve from two to one. If, however, the price of a hot dog decreases to $4, the quantity demanded moves down the demand curve and increases from two to three. At a price point of $4, customers want to consume three hot dogs.

A shift in the demand curve itself only happens in the long run and comes as a change to equilibrium. Complete changes in consumer behavior normally cause this type of shift. If, for example, environmentally conscious consumers switch from gas cars to electric cars, the demand curve for traditional cars inherently shifts.

Price Elasticity of Demand

The quantity of a good or service demanded at a given price level is affected by its price elasticity. A good or service that is highly elastic means the quantity demanded varies widely at different price points. Conversely, a good or service that is inelastic is one with a quantity demanded that remains relatively static at varying price points. An example of an inelastic good is insulin. Regardless of price point, those who need insulin demand it at the same amount.