Quantity Demanded

What Is Quantity Demanded?

Quantity demanded is the specific amount of a product that consumers want to buy at one particular price, over a set period of time. It is a single point on a demand curve, not the whole relationship between price and purchases. When the price changes, the quantity demanded changes too, but the underlying willingness to buy, which economists call demand, stays the same.

How It Works

Economists generally observe that, all else being equal, a higher price leads to a lower quantity demanded, and a lower price leads to a higher quantity demanded. This inverse relationship is often called the law of demand. Buyers may switch to substitutes, cut back on purchases, or delay buying when prices rise. Prices falling tends to have the opposite effect.

Quantity demanded is always tied to a price and a time frame. Saying that consumers want 10,000 units is incomplete unless you also say at what price and over what period.

Why It Matters to Investors

Companies and analysts study quantity demanded to estimate future sales and revenue. A business that understands how sensitive its customers are to price changes can make better decisions about pricing and production. The concept also helps explain how market equilibrium forms, since prices adjust until the quantity demanded matches the quantity supplied.

Because quantity demanded depends on many factors besides price, such as income, consumer tastes, and the prices of related goods, analysts often look at these other influences as well. Changes in those factors shift the entire demand curve rather than moving along it.