Question

distinguish between decrease in demand and decrease in quantity demand brief

Answer 1

to the left)

Contraction of demand


When we say there is a shift in the demand curve to the left then it means the entire demand curve has shifted to the left side.

 

 

The demand curve shifts to the left when there are changes in factors other than the price of the product resulting in decrease in demand.

 


Let us take an example of tea. If there is a fall in the price of the coffee then the quantities demanded for tea will fall. The change (decrease) in demand for tea is due to the fall in the price of its substitute (coffee in this case).

 

The demand curve shifts to the left due to changes in the non price factors. In this case it was the substitution effect.

 

 

 

 

 

 


Contraction of demand shows the changes on the same demand curve. Here there is an upward movement along the same demand curve.

 

Contraction of demand occurs when there is a rise in the price of the product. Here the impact of price increases is plotted on the same demand curve.

 

 

If the price of tea is increased than this will result in less purchases of tea. Here the only reason being the price (all the other factors are kept constant) will cause the variation (fall) in demand.

 

 

Contraction in demand is caused only due to the price factor.