Table of Contents

CHANGE IN DEMAND

Change in demand which is also known as variations in demand means the change in the quantity demanded of the commodity due to the various factors like price of own commodity, price of related goods, income of consumer, taxation policy of government, tastes and preferences of the consumers etc. Change in Demand can be explained in two ways:

CHANGE IN DEMAND – MOVEMENT ALONG THE DEMAND CURVE

Movement along the demand curve arises, when there is the change in the demand of the commodity due to the change in price only. It is of two types:

Extension in Demand
Contraction in Demand

EXTENSION IN DEMAND

When there is increase in the demand due to the decrease in price, then there is a case of Extension in Demand. Extension in Demand results out of the decrease in price only which means the other factors affecting the demand will remain constant. This can be explained with the help of the following table:

PRICE	QUANTITY	DESCRIPTION
10 5	20 40	Price falls Demand rises

From the above table, it is clearly shown that at the price of ₹10 the demand was 20 units. But when the price falls to ₹5, the demand for commodity increased to 40 units.

This can also be shown with the help of curve:

The above curve shows that at the price P₀, the quantity demanded was Q₁. And as the Price decreases from P₀ to P₁, the quantity demanded increases from Q₀ to Q_1.

_{CONTRACTION IN DEMAND}

_{When there is decrease in the demand due to the increase in
price, then there is a case of Contraction in Demand. Contraction in Demand
results out of the increase in price only which means the other factors
affecting the demand will remain constant. This can be explained with the help of
the following table:}

_PRICE	_QUANTITY	_DESCRIPTION
₅ ₁₀	₄₀ ₂₀	_{Price rises} _{Demand falls}

_{From the above table, it is clearly shown that at the price
of ₹4 the demand was 40 units. But when the price rises to ₹10, the demand for
commodity decreased to 20 units.}

_{This can also be shown with the help of curve:}

The above curve shows that at the price P₀, the quantity demanded was Q₀. And as the Price increases from P₀ to P₁, the quantity demanded decreases from Q₀ to Q_1.

CHANGE IN DEMAND -SHIFTS IN DEMAND CURVE

Shifts in demand curve arise when there is change in the demand due to the factors other than price. This is also called the change in the level of demand. It is of two types:

Increase in Demand
Decrease in Demand

INCREASE IN DEMAND

If the demand of the commodity increases due to the factors other than price like tastes and habits of consumers, increase in income of consumer etc. it can also be described as:

SAME PRICE MORE DEMAND
MORE PRICE SAME DEMAND

Same Price More Demand: If the price is same, but still there is increase in demand, it is a case of Increase in Demand.

More Price Same Demand: If the price of the commodity rises, but it has no impact on the demand of the commodity, it is also the case of Increase in Demand.

It can be explained as follows:

PRICE	DEMAND
SAME PRICE	MORE DEMAND
10 10	20 40
MORE PRICE	SAME DEMAND
10 20	20 20

The table shows when the price of the commodity is ₹10, demand is 20 units. Price remains the same but the demand increases to 40 units. It is called Increase in Demand.

Similarly, the price of the good was ₹10, the units demanded was 20. Now the price rises to ₹20 but the units demanded remains the same i.e. 20. This is also called Increase in Demand.

This can be shown with the help of curve also:

The curve shows the price remains the constant but the demand increases from D₁to D₂.

DECREASE IN DEMAND

If the demand of the commodity decreases due to the factors other than price like tastes and habits of consumers, decrease in income of consumer etc. it can also be described as:

SAME PRICE LESS DEMAND
LESS PRICE SAME DEMAND

Same Price Less Demand: If the price is same, but still there is increase in demand, it is a case of Increase in Demand.

Less Price Same Demand: If the price of the commodity rises, but it has no impact on the demand of the commodity, it is also the case of Increase in Demand.

It can be explained as follows:

PRICE	DEMAND
SAME PRICE	LESS DEMAND
10 10	40 20
LESS PRICE	SAME DEMAND
20 10	20 20

The table shows when the price of the commodity is ₹10, demand is 40 units. Price remains the same but the demand decreases to 20 units. It is called Decrease in Demand.

Similarly, the price of the good was ₹20, the units demanded was 20. Now the price falls to ₹10 but the units demanded remains the same i.e. 20. This is also called Decrease in Demand.

This can be shown with the help of curve also:

The curve shows the price remains the constant but the demand decreases from D₁to D₂.

Also Study	Also Study	Also Study	Also Study
Theory of Demand	Law of Demand	Demand Function	Exceptions of law of demand
Elasticity of demand	Change in demand	Price elasticity of demand	Law of demand Vs Elasticity of demand
Factors affecting price elasticity of demand	Production function	Short run vs long run production function	Law of variable proportions
Types of demand	Managerial economics	Characteristics of managerial economics	Scope of managerial economics
Utility analysis	Law of diminishing marginal utility	Law of equi marginal utility	Consumers Equilibrium
Indifference curve analysis	Consumer equilibrium using indifference curve analysis	Relationship between TP, AP and MP	Law of increasing returns
Law of diminishing returns	Law of constant returns	Returns to Scale	Economies and diseconomies of scale
Concept of costs	Relationship between AC and MC	Traditional theory of costs	Modern theory of costs
Explicit vs Implicit costs	Revenue	Perfect competition	Monopoly
Price discrimination	Difference between perfect competition and monopoly	Perfect Vs Monopolistic competition	Monopoly and monopolistic competition
Product differentiation strategy	Monopolistic competition	National Income in India	Measurement of national income in India
Consumption function	Keynes Psychological law of consumption

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