What is the difference between equilibrium quantity and quantity demanded?? how are they illustrated on a demand and supply curve?
The quantity demanded refers to the quantity at which the consumers are willing and able to purchase at the given price.
When we have a set of quantity demanded, each corresponding to a specific price of the good, we get the demand schedule (aka the demand curve). Read more about this on my article here.
The demand schedule in itself, is an insufficient condition to guarantee that particular level of consumption of the good or service, since it needs to be produced first. Recall that the demand schedule is merely a representation of the consumers’ wants or needs, and yet to be fulfilled.
Referring to the diagram above, here’s a question to you: Which point represents the actual consumption level in the market? Is it (Q1, P1), or (Q2, P2)?
Answer: You can’t tell – because you will need the corresponding supply of the good or service to determine the actual consumption point! And that is of course, represented by the supply schedule, which maps the suppliers’ willingness and ability to produce at various prices.
The equilibrium quantity therefore refers to the point where the quantity supplied (Qs) and the quantity demanded (Qs) coincides, at the same given price.
It reflects the actual point of consumption of the market, at the point of market-clearing (i.e. supply meets demand). Why so?
Because in theory, at the given price, if Qd =/= Qs, then 2 possibilities emerge:
- At price = P2, Qs > Qd: A surplus occurs, causing a downward pressure on price which leads to a convergence between Qs and Qd; or
- At price = P1, Qs < Qd: A shortage occurs, causing an upward pressure on price which too, leads to a convergence between Qs and Qd.
And finally, the detailed explanation behind the tendency for quantity demanded, and supplied, to always converge at the equilibrium quantity, is described by the “Marginalist Principle”, which I have explained in my notes here.
P.S: To the reader who posed this question to me via the questionnaire on my site, my apologies – but you probably made a typo with your stated email address and my reply to you bounced. Well, I hope you are reading this, and found my answer useful. Write back to me and make sure you type the correct email address this time!