Expansion & Contraction of demand

Expansion & Contraction of demand

Demand refers to the number of goods & services that the consumers are willing to purchase and are able to afford at different prices at a given period of time. To constitute a demand, only desire to purchase any goods & services is not enough but desire should be accompanied by the means of purchase and the willingness to use that means of purchase to purchase the required product or service.

Expansion of demand

Expansion of demands means when there is an increase in the demand of any commodity due to a decrease in the value of such commodity other factors remains the same, in other words when the demand for any product increases due to a decrease in the price of the product and all other factors remain the same, such situation is known as expansion of demand or increase in demand.

Contraction of demand

Contraction of demand means when there is a decrease in the demand of any product due to the increase in the price of the product other factors remains the same, in simple words when the demand for any commodity is decreased due to the increase in the value of such commodity and there is no change in other factors, it is known as the contraction of demand.

Examples

We will understand the concept of Expansion of Demand and Contraction of demand with the help of the examples and by the use of graphs.

Example of Expansion of Demand- Suppose the value of the book in a market is $ 100 per unit and a customer wants to purchase the 10 books from such market at that value. Now if all other things such as his income, content on the book, writer of the book, the value of other thing remain same i.e. there is no change in other factors and the value of the book falls to $ 90 per unit and now the customer buy 20 books in the place of 10, then such situation is known as expansion of demand or increase in demand.

Price of the  Book ( Per unit)Demand for the  Book
100.0010
90.0020

Based on the graph, we can say that if the price of the book is Rs.100 then the customer will purchase only 10 books, if the price of the book is decreased to Rs.90 then the customer will purchase 20 books. This concept is known as expansion of demand or increase in demand.

Example of Contraction of demand

Suppose the value of a pen in a market is $ 50 per unit and a customer wants to purchase the 100 pens from such market at that value. Now if all other things such as his income, brand of pen, the value of other thing remain same i.e. there is no change in other factors and the value of the pen increase to $ 60 per unit and now the customer buy 90 books in the place of 100, then such situation is known as Contraction of demand or decrease in demand.

Demand for the PenPrice of the  Pen (Per Unit)
10050.00
9060.00

Shift in demand curve

The shift in the demand curve is a situation when there is the change in the demand of any product or any goods without the change in the price of such goods or product i.e. when the price of any product is remain the same but due to other factors there is the increase or decrease in the demand of such product, then such situation is known as a shift in demand curve or movement in demand curve.

Shift in the demand curve is a situation when there is no change in price but the demand of the product is increase or decrease due to the given reasons-

  • The income of the purchaser– If there is an increase in the income of the buyer, he can purchase more quantities of such goods but if there is a decrease in the income of the buyer then he will purchase less quantity.
  • Taste of the purchaser– The demand for any goods also depends upon the taste of the buyer, if he like such product then he will purchase more otherwise he will purchase it in less quantity.
  • Customer trends– The demand for the goods also depends upon the trends, when it is in more trends, the demand will also be high.
  • Needs of the buyer– The demand for the goods affected by the need of the buyer, when he needs more, he will purchase more and when he needs less he will purchase less.
  • Price of substitute goods– In case when there is an increase or decrease in the price of a substitute product will affect the demand for the main product.

There are two types of shifting in the demand curve-

(I)- Rightward Shift

(II)- Leftward Shift

Rightward Shift in demand curve

When there is an increase in the demand for any goods at the same rate of a good, there is a rightward shift in the demand curve.

For example, Ms. Helly goes to the market to buy 1 dress, she likes a dress and the price of the dress is $1000 but she purchases 2 dresses in the place of 1 one for her and 1 for her sister at the same price. This situation is known as a rightward shift in the demand curve.

Price of Dress ( Per unit)Demand for Dress
1000.001
1000.002

 Leftward Shift in the demand curve-

When there is a decrease in the demand for any goods at the same price of goods. It is known a leftward shift in the demand curve.

For example, Mr. Raham wants to buy 10 bananas at the rate of $ 5 per banana but he purchases only 5 bananas at the same price because of the bad quality of the bananas. This situation is known as a leftward shift in the demand curve.

Price of Banana ( Per unit)Demand of Banana
5.0010
5.005

Final Thought

Based on the above discussion we can conclude that in the demand curve there may be downward and upward movements. The movement in the demand curve depends upon the various factors which is not only the price but also the need of the customer, income status of the customer, taste of the buyer, etc. which can directly or indirectly affect the demand for the product.

Related Articles:

  1. WHAT IS DEMAND?
  2. DETERMINANTS OF DEMAND
  3. LAW OF DEMAND
  4. DETERMINANTS OF PRICE ELASTICITY OF DEMAND

Share this Knowledge Base

Leave a Reply

Your email address will not be published. Required fields are marked *