Question

Distinguish between change in demand and change in quantity denamded

Answer 1

The word ‘demand’ refers to the whole demand curve of a commodity. The demand curve shows the relationship between the price of a commodity and the quantity demanded of the same on the assumption that all other variables affecting demand remain constant.



However, the term quantity demanded is a narrow term. It refers to a particular point on the curve. Now by looking at a demand curve we can see the effect of change in price on quantity demanded. If price rises the quantity demanded of a commodity falls and if price falls the quantity demanded of the same rises. The effects of such price changes are shown by movements along the same demand curve from left to right or right to left.

Such movements show change in the quantity demanded of a commodity. These movements are sometimes described as extensions or contractions of demand. If price falls there is a downward movement to the right. This is known as an extension of demand. On the other hand, a contraction of demand refers to an upward movement along the same demand curve from the right to the left in response to a rise in price.

If, on the other hand, there is a change in any other factor (except the price of the commodity under consideration) the demand curve will shift to a new position. This implies that at a given price, a larger or a smaller quantity of the commodity will be demanded. This is known as a change in demand.

Such a change occurs when there is a change in the income of buyers or in its distribution, or in the prices of related goods (substitutes and compliments), in people’s expectations or in non-economic factors. A change in demand is usually referred to as a change in the con­ditions of demand. For example, when most people in India get bonus at the time of festival they buy more sweets even though their prices remain the same.

Changes in demand are of two types. If demand increases the demand curve shifts to the right. If demand falls the demand curve shifts to the left. Such changes shows that different quantities are demanded at every price. In such cases we have to draw a new demand curve as is shown in Fig. 3.5. It shows two demand curves for a commodity.

A shift of the demand curve from D1D1 to D2D2 implies an increase in demand; more is demanded q1 instead of (q0) at the same price (p0). A shift in the opposite direction would imply a decrease in demand. Thus less is (q0 instead of q1) demanded at a fixed price (po)