VARIATIONS–IN-DEMAND | CHANGES-IN-DEMAND | ||
Variations in demand take place because of a change in price.. | **Changes in demand take place because of a change in factors other than price | ||
Extension in demand | Contraction in demand | Increase in demand | Decrease in demand |
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Price is measured on the Y axis; quantity demanded is measured on the X axis; OP is the original price of the commodity; OQ is the original quantity demanded and E is the original equilibrium point on the original demand curve DD | |||
Variations in demand are shown along the same demand curve DD. | Demand curve shifts to the right of the original, from DD to D1D1. | Demand curve shifts to the left of the original from DD to D1D1 | |
When the price falls from OP to OP1, quantity demanded extends from OQ to OQ1. Therefore this is known as extension in demand. | When the price risess from OP to OP1, quantity demanded contracts from OQ to OQ1 Therefore this is known as contraction in demand | a)At the same price PO more is demanded ie QO1 instead of OQ b) The same quantity OQ is demanded at a higher price ie OP2 instead of OP | a)At the same price PO less is demanded ie QO1 instead of OQ b) The same quantity OQ is demanded at a lower price ie OP2 instead of OP |
The equilibrium point E shifts downwards to E1 on the same demand curve DD | The equilibrium point E shifts upwards to E1 on the same demand curve DD | The equilibrium point E shifts either to E1 or toE2 on the new demand curve D1D1 to the right of the original demand curve DD | The equilibrium point E shifts either to E1 or toE2 on the new demand curve D1D1 to the left of the original demand curve DD |
** Change in non- price ie factors influencing demand and assumptions of the law of demand.