Question

Distinguish between expansion of demand and contraction of demand.

Answer 1

What do you mean by Expansion and Contraction in Demand?

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We have studied under the law of demand that other things remaining the same, if price of a commodity rises, its demand decreases and if price of the commodity falls, its demand increases.

When quantity demanded of a commodity increases as a result of the fall in the price, it is called extension (or expansion) in demand (a movement down the demand curve) and when the quantity demanded decreases as a result of an increase in the price of the commodity, it is called contraction in demand (a movement up the demand curve). Thus, extension and contraction in demand imply change in quantity demanded due to change in the price of the commodity, other things remaining the same.

Answer 2

Expansion and contraction in demand:

Expansion of demand:

Expansion of demand can be specified as the rise in the demand of the product due to the fall in the particular price.

Contraction of demand:

 

Contraction of demand can be specified as the fall in the demand of the product due to the rise in the particular price.

• When quantity demanded of a product increases as a result of the fall in the price, it is termed extension (or expansion) in demand and when the quantity demanded declines as a result of an increase in the price of the product, it is called contraction in demand.

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