Entension and contraction &

increase and decrease in demand

EXTENSION & CONTRACTION OF DEMAND:

The demand for a commodity changes due to a change in price. It is called
extension and contraction of demand. When there is decrease in price of
commodity there is in increase in demand of that commodity. This is called
extension of demand. When there is increase in price of a commodity there is
decrease in the demand for that commodity. This called contraction of
demand. Thus, demand varies in opposite direction due to change in price.

Extension of Demand:
There is extension of demand for a commodity when there is
decrease in the price of that commodity. When price is 15 dollars the
demand is 50 kilograms. When price comes down to 10 dollars there
is extension in demand fro m 50 to 60 kilograms
Contraction of Demand:
There is contraction of demand for a commodity when there
is increase in the price of commodity. When price is 10
dollars per kilogram the demand is 40 kilograms. When price
increases to 20 dollars there is contraction of demand from
40 to 30 kilograms.
Increase and decrease in demand:-
In case of extension and contraction of demand we have seen that
the change takes place as a result of change in prise all other factors
remain constant. When all the other influencing demand also change
there is an increase or decrease in demand and the demand curve
shifts either to its right or left. If the income of a consumer rises he
would be able to purchase the commodities which he earlier could
not afford. This would result in an increase in demand and therefore,
the demand curve shifts to the right. If, on the other hand, the goods
are out of fashion, the demand of that good will decline, resulting in
the shift of the demand curve to the left.

Increase in demand:-
When demand changes not because of price but because of changes
in other determinants of demand, it is a case of either increase or
decrease in demand. “Increase in demand means more demand at
same price”. In case of increase in demand the demand cure shifts to
the right hand side or shift away from the origin.
Decrease in deamand:-
“Less demand at same price”. In case of decrease in demand, the
demand curve shifts towards the origin or to the left hand side.
Difference between extension of demand
and increase in demand.

 Extension of demand refers to increase in quantity demanded

due to decrease in own price of the commodity while increase
in demand refers to increase in quantity demanded even when
own price of the commodity is constant.
 Extension of demand is studied on the assumption that other
determinants of demand (other than own price of the
commodity) are constant while Increase in demand is studied
on the assumption that own price of the commodity is
constant.
 Extension of demand leads to downward movement along the
demand curve from left to right while increase in demand leads
to forward shift in demand curve.