Question

Differentiate between extension and contraction of demand.

Answer 1

Basis	Extension of Demand	Contraction of Demand
(i) Meaning	Other things being equal, when a fall in price raises demand for a commodity, it is called an extension of demand or increase in the quantity demanded.	Other things being the same, when demand for a commodity falls as a result of a rise in its price, it is called a contraction of demand or decrease in quantity demanded.
(ii) Demand curve	Under it, there is a downward movement along the same demand curve (from A to B), as shown in Figure, but the consumer remains on the same demand curve.	Under it, there is upward movement along the same demand curve (from B to A as shown in Figure).
(iii) Example	Price (₹ per unit) Demand (Units) 10 100 8 150	Price (₹ per unit) Demand (Units) 10 100 12 80
(iv) Cause	It is caused by a fall in the price of the commodity; other things remain the same.	It is caused by a rise in the price of the commodity only.