Contraction and Expansion of Demand (Variations in Demand) | Free Economic Blogs
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Contraction and Expansion of Demand
Variations in Demand
When the demand for a commodity falls or rises due to a change in price alone and other factors remain constant, it is called variations in demand. It is of two types:
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1) Expansion of demand
Expansion of demand refers to rise in quantity demanded due to fall in price alone while other factors like tastes, income of the consumer, size of population, etc. remain unchanged. Demand moves in downward direction on the same demand curve. This is explained with the help of following fig.
As shown in fig. DD is demand curve. A downward movement on the same demand curve from point a to point b indicates an expansion of demand.
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2) Contraction of Demand
Contraction of demand refers to a fall in demand due to rise in price alone. Other factors like tastes, income of the consumer, size of population, etc. remain unchanged. Demand curve moves in the upward direction on the same demand curve. This can be explained with the help of following fig.
As shown in fig. DD is a demand curve. An upward movement on the same demand curve from point b to point a shows contraction of demand.
