VARIATIONS IN DEMAND

VARIATIONS IN DEMAND

 

When demand for commodities increases or decreases due to a change in price alone while other factors being constant is known as a variation in demand.

Variation of demand of two types:

1) Expansion of demand: Expansion of demand refers to an increase in quantity demanded due to a fall in the price of commodities, while other things being constant.

Expansion in demand is indicated by the downward movement of demand on the same demand curve

EXPLANATION:

1) The original price is OP and the Orignal quantity demanded is OQ.

2) As price decreases quantity demanded increases from OQ to OQ1.

2) Contraction in demand: Contraction of demand refers to a decrease in the quantity demanded due to a rise in the price of commodities while other things being constant.    

Contraction in demand is indicated by upward movement on the same demand curve.

 

EXPLANATION:

3) The original price is OP and the Orignal quantity demanded is OQ.

4) As price decreases quantity demanded increases from OQ to OQ1.