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Question
Differentiate between extension and contraction of demand.
Solution
| 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).  |
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| (iii) Example |
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| (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. |
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