Quantity Demanded

Definition

Quantity demanded refers to the amount of a good or service that consumers are willing and able to purchase at a given price during a specific period of time. It is a central concept in the study of supply and demand, as well as the determination of market equilibrium price and quantity.

5 Must Know Facts For Your Next Test

1. Quantity demanded is distinct from demand, which represents the entire demand schedule or curve, showing the relationship between price and quantity demanded.
2. The law of demand states that as the price of a good or service increases, the quantity demanded decreases, and vice versa, all else being equal.
3. Shifts in demand, whether to the left or right, will lead to changes in the equilibrium price and quantity, which can be analyzed using the four-step process.
4. Changes in non-price factors, such as consumer income, prices of related goods, consumer preferences, and number of consumers, can cause shifts in the demand curve, leading to changes in equilibrium price and quantity.
5. Quantity demanded is a key determinant of market equilibrium, as it interacts with quantity supplied to establish the market-clearing price and quantity.

Review Questions

• Explain how the law of demand relates to the concept of quantity demanded.
  • The law of demand states that as the price of a good or service increases, the quantity demanded decreases, and vice versa, all else being equal. This inverse relationship between price and quantity demanded is a fundamental principle that underpins the concept of quantity demanded. The quantity demanded refers to the specific amount of a good or service that consumers are willing and able to purchase at a given price, and this amount will change in accordance with the law of demand.
• Describe how shifts in demand can affect the equilibrium price and quantity using the four-step process.
  • The four-step process for analyzing changes in equilibrium price and quantity involves: 1) Identifying the change in a non-price factor that shifts the demand curve, 2) Determining the direction of the demand shift, 3) Analyzing the impact on the equilibrium price and quantity, and 4) Explaining the reasoning behind the new equilibrium. A shift in demand, whether to the left or right, will lead to a change in the equilibrium price and quantity, as the quantity demanded at each price point has changed. The four-step process allows for a systematic analysis of how these changes in quantity demanded affect the market equilibrium.
• Evaluate the role of quantity demanded in the determination of market equilibrium, and how it interacts with quantity supplied.
  • Quantity demanded is a crucial factor in the determination of market equilibrium, as it represents the willingness and ability of consumers to purchase a good or service at various prices. The interaction between quantity demanded and quantity supplied is what establishes the market-clearing price and quantity at equilibrium. If the quantity demanded is greater than the quantity supplied, there will be a shortage, leading to an increase in price until equilibrium is reached. Conversely, if the quantity demanded is less than the quantity supplied, there will be a surplus, leading to a decrease in price until equilibrium is restored. The dynamic relationship between quantity demanded and quantity supplied is central to understanding how markets reach and maintain equilibrium.

Related terms

Demand:

Demand is the willingness and ability of consumers to purchase a good or service at various prices during a given time period.

Law of Demand:

The law of demand states that as the price of a good or service increases, the quantity demanded decreases, and vice versa, all else being equal.

Equilibrium Price and Quantity: The equilibrium price and quantity are the price and quantity where the quantity demanded and quantity supplied are equal, resulting in a stable market clearing price.