Question

Distinguish between increase in demand and decrease in demand.

Answer 1

Difference between extension of demandand increase in demand. Extension ofdemand refers to increase in quantity demanded due to decrease in own price of the commodity while increase in demandrefers to increase in quantity demanded even when own price of the commodity is constant

Answer 2

A decrease in demand causes a reduction in the equilibrium price, while the increases causes an increase in the equilibrium price.

• A decrease in demand will lead to a decrease in a good's price and quantity of equilibrium. An increase in demand will cause the price and quantity of a good to rise in equilibrium.
• The drop in demand leads to the development of excess supply at the initial price. The increase in demand contributes to the production of excess demand at the original price.
• Excess supply can allow prices to fall, and suppliers tend to sell less of the good as price falls, thus increasing production. Excess demand will cause the price to increase, and as the suppliers are willing to sell more, so the production will rise.