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Question
Answer the following question.
Differentiate between the extension of demand and an increase in demand, using diagrams.
Solution
| Basis | Expansion in Demand | Increase in Demand |
| Meaning | When the quantity demanded rises due to a decrease in the price. Keeping other factors constant. it is known as an expansion in demand | When the demand rises due to a favorable change in the other factors, at the same price, it is known as an increase in demand. |
| Effect on Demand Curve | There is a downward movement along the same demand curve. ( See fig). | There is a rightward shift ( See fig). in the demand curve. |
| Reason |
It occurs to decrease in the price of the given commodity
|
It occurs due to a favorable change in the other factors like an increase in the prices of substitutes, a decrease in the prices of complementary goods, an increase in income in the case of normal goods, etc.
|
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