# Economic Order Quantity (EOQ): Definition & Formula

Economic order quantity (EOQ) is the ideal order quantity that minimizes total holding and ordering costs.

**Why is economic order quantity (EOQ) important? **

EOQ is important because it helps businesses optimize their inventory levels, minimize costs, and ensure they have sufficient stock to meet customer demand.

**An easy way to understand economic order quantity (EOQ) is:**

Think of it as the ideal amount of inventory a company should order to minimize costs. It balances the cost of holding inventory with the cost of placing orders.