How much chalk should you actually be using?
TL;DR: Less than most people use. A thin, even coat across your palms and fingers does the job. Piling on more chalk than that mostly ends up on the floor or the holds, and can actually make your grip feel worse by building up a layer between your skin and the rock.
Why do people over-chalk?
Mostly habit and a bit of psychology. Chalking up feels like doing something productive, especially when you're nervous about a move, so it's easy to over-apply as a kind of ritual rather than because your hands actually need it. There's also a common assumption that more chalk means more friction, which isn't really how it works past a certain point.
What does too much chalk actually do?
Past a thin coat, extra chalk doesn't add friction, it just sits on top of your skin as a loose layer. That layer can actually reduce the contact between your hand and the hold, which is the opposite of what you're going for. It also means more chalk falling off onto the hold itself, which affects the next person's grip too.

Session (150g)
Session is an 80/20 blend, built to outlast. Fine powder coats your hands on the first dip, so the grip is there immediately. The chunky ...
What does the right amount look like?
A light, even coat is enough. Your hands should look dry and lightly dusted, not caked white. If you can see chalk actively falling off your hands as you climb, that's usually a sign you applied more than you needed.
When should you actually reapply?
When your hands start feeling damp or slick again, not on a fixed schedule. Some climbers get in the habit of chalking up between every single attempt regardless of need, which wastes chalk and adds to the mess in a gym without doing much for grip. Reapplying when you actually notice a difference is a better gauge than reapplying out of habit.
Does the type of chalk change how much you need?
A bit. A well-balanced blend tends to need less reapplication than a mostly-fine chalk, since it isn't wearing off as fast. That doesn't mean applying more of it upfront helps, the same thin-coat rule still applies. It just means you'll likely be reaching for the bag less often over the course of a session.
FAQ
Is it possible to use too much chalk? Yes. Past a thin, even coat, extra chalk sits on top of your skin rather than adding grip, and can actually reduce contact with the hold.
How do I know if I'm using too much chalk? If your hands look caked rather than lightly dusted, or you see chalk visibly falling off as you climb, you're likely applying more than you need.
Should I chalk up between every attempt? Not necessarily. Reapplying when your hands actually feel damp or slick again is a better approach than chalking up on a fixed routine.
Does a better chalk formula mean I need less of it? It can mean you need to reapply less often, since a balanced blend tends to hold up longer than mostly-fine chalk. The amount you apply at once should stay about the same either way.
Why does over-chalking make my grip feel worse? A thick layer of chalk on your skin can act as a barrier between your hand and the hold, reducing contact rather than improving it.
The takeaway
More chalk isn't the same as more grip. A thin, even coat, reapplied when you actually need it rather than out of habit, does more for your climbing than piling it on ever will.