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What is a Demand Schedule?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 26 September 2016
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    Conjecture Corporation
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A demand schedule is a type of table that helps to identify the quantity of a given product that is likely to be demanded at a specified price. Tables of this type help producers to have some idea of how many units to produce, given the current market price for the good or service. At the same time, the data found in the table can provide valuable information regarding what type of change in demand can reasonably be anticipated in the event that the price consumers pay is adjusted upward or downward.

The idea behind the demand schedule is that price does have an impact on the consumption of a given product. That impact often involves consideration of factors such as the current state of the economy, the unemployment rate and the perception by consumers of the product as being a necessity or a luxury purchase. Depending on how much it costs consumers to purchase that product, they may reduce their consumption if the price is considered less affordable, while increasing consumption if the price is low enough to be considered a bargain.

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A demand schedule is often prepared in conjunction with what is known as a supply schedule. Utilizing data from both schedules makes it possible to adjust production for a defined period of time so that enough units are produced to meet demand at the current price, but not so much production that inventories of finished goods languish in warehouses. From this perspective, the information contained in the demand schedule is helpful in managing business costs, since smaller inventories on hand mean less taxes to pay for the goods currently in storage awaiting sale.

The data contained in the demand schedule is subject to change, making it necessary to update the information on a regular basis. By monitoring economic, political, and other events that are likely to have some type of impact, positive or negative, on consumer buying habits, it is possible to use the updated information to adjust pricing to move units already produced, or to curtail production by a certain amount in order to adjust to a temporary decrease in demand. Doing so allows companies to make more efficient use of their resources and to prevent the chance of not having enough product on hand to meet an upswing in demand, as well as preventing the buildup of a huge inventory that will take much longer to dispense than originally envisioned.

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