Quantity Demanded
The term “quantity demanded” is used in economics to describe a total amount of goods or services that customers are willing and able to buy within a specified period of time for a certain price. The quantity demanded is highly dependent on the price of items, even if demand and supply on the market is well-balanced, and the price is quite stable. This state of the market is also known as equilibrium.
Relationships between the price and the Quantity Demanded
As it was stated earlier, an item’s price has a great impact on its demand and quantity demanded as well. This impact is especially important when all the non-price factors are extracted out of context. Generally, if the price of a product or service is high, its demand will probably be quite low. On the contrary, if the price is low, demand might be pretty high. However, it’s a simplified explanation. There might be other factors that influence the quantity demanded.
The relationships between the price and demand can be displayed on the chart. Typically, they form a slopping line that is called a demand curve. A generalized example of the chart is presented below.
As you can see on the chart, the quantity demanded is shown on the x-axis, while the y-axis represents the change of the price. Therefore, the demand curve demonstrates how the price influences the quantity of goods. The relationships between these variables are inverse, because when the price gets higher, demand falls down, or vice versa. This pattern is explained by the law of demand.
Elasticity of demand
The degree to which demand changes under the influence of the price refers to an elasticity of demand. In other words, it’s a measure of the demand variability. The elasticity of the quantity demanded is measured the same way. The steepness of the slope on the chart shows how elastic or inelastic the good or service might be.
Consequently, some products are elastic, while others – aren’t. Let’s illustrate the difference between them by giving a few examples. Luxury products, gadgets, and vehicles are highly elastic, because they’re not essential for people, they’re something extra. If the price of these goods is too high for customers, they might postpone the purchase for later. When the price becomes more attractive, the quantity demanded is likely to grow. Some pharmaceuticals might be considered as an example of inelastic goods (e.g., insulin). If the price of such products grows, the quantity demanded stays almost the same, because it is extremely important for people.
Examples of the Quantity Demanded
Let’s consider an abstract and simplified example of the quantity demanded. Suppose that a cup of cappuccino in a coffee shop costs $3. Usually, an average customer of this shop buys two cups per day. So, we have the price, which is $3, and the quantity demanded, which is 2 cups per day for one person. Now, imagine that the price increases to $4 per cup. According to the law of demand, the quantity demanded has to decrease. After the change of the price, the average customer will buy only one cup of cappuccino per day. The price-demand relationships might be shown as a slopping line on the chart, where the cups requested by the customers are presented on the x-axis, and the price of cappuccino – on the y-axis.
In contrast, if the coffee shop decreases the price, the quantity demanded will rise. As a result, the average customer will buy three cups of cappuccino per day if the price is $2. However, there is a possibility that the quantity demanded will stay the same despite the change of the price, but here we review a more simplified example, where other factors, except for the price, aren’t considered.
