A demand schedule is a chart that shows the number of goods or services demanded at specific prices. In other words, it’s a table that shows the relationship between the price of goods and the amount of goods consumers are willing and able to pay for them at that price.
This schedule is based on the demand curve that illustrates inverse relationship between quantities demanded and price. As the price of a good increases, the quantity demanded decreases.
The table simply takes the plotted points on the demand curve and puts them on a table. In an effort to plan production processes, management can look at the schedule and figure out how many units consumers will demand based on the price.
They can also use this schedule to maximize profits by pricing goods or services according to their demand elasticity. In other words, they might be able to maximize profits by selling fewer high priced goods than many more low priced goods.
Example
Alex, a new storeowner, wants to estimate the demand for his goods, so he gives a survey to his potential customers. The survey is comprised of different prices they would be willing to pay for the same product. Every participant in the survey is asked to provide the highest dollar amount they would pay.
He collects the surveys then plots them with a demand curve with quantity demanded on X-axis and Price on Y-axis. It shows that at $4.99, 14 people would buy the product and at $6.99, 10 people would buy it. Going down the list of prices he makes a table showing the amount demanded according to each price. Using this schedule, Alex can make decisions on how much to charge and how it will affect his profits.
The demand schedule is often accompanied by a supply schedule. The point at which both charts intersect is called the equilibrium. This price and quantity is the optimal point for the market.
Demand Schedules vs. Supply Schedules
A demand schedule is typically used in conjunction with a supply schedule, which shows the quantity of a good that would be supplied to the market by producers at given price levels. By graphing both schedules on a chart with the axes described above, it is possible to obtain a graphical representation of the supply and demand dynamics of a particular market.
In a typical supply and demand relationship, as the price of a good or service rises, the quantity demanded tends to fall. If all other factors are equal, the market reaches equilibrium where the supply and demand schedules intersect. At this point, the corresponding price is the equilibrium market price, and the corresponding quantity is the equilibrium quantity exchanged in the market.
TAKEAWAYS
- Analysts can estimate the demand for a good at any point along the demand schedule.
- Demand schedules, used in conjunction with supply schedules, provide a visual depiction of the supply and demand dynamics of a market
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