Question

Which of the following statement is true?

Options

• When the price increases, there is a shift in the demand curve.

• When the quantity demanded decreases there is a shift in the demand curve.

• When the price decreases, there is a downward movement along the demand curve.

• When the quantity demanded decreases, there is a downward movement along the demand curve.

Answer 1

When the price decreases, there is a downward movement along the demand curve.

Explanation:

When the demand for goods changes as a result of a price change, it is represented at different points on the same demand curve. It is referred to as movement along the demand curve. It depicts demand's 'extension and contraction.' In both of these cases, the demand curve remains unchanged.

1. Extension of Demand: When the demand for a good increase due to a decrease in the price of that good, it is referred to as Extension of Demand.
2. Contraction of Demand: Other things being equal, contraction of demand occurs when demand for a good decrease due to an increase in the price of that good.