Difference between Contraction of Demand and Decrease in Demand

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  Basis

    of

Difference

 

   Contraction of Demand

 

  Decrease in Demand

 

Meaning

When quantity demand for a commodity falls due to rise in the price, keeping other factors as constant is called a contraction of demand.

When demand for a commodity decreases due to change in other factors, keeping price as constant is called a decrease in demand.

Cause

Rise in price of the commodity

Several causes:

a. Decrease in price of the substitute goods

b. Increase in price of the complementary goods

c. Decrease in income in case of normal goods.

d. Unfavorable tastes and preferences are developed.

Effect on demand curve

It is shown as movement from

right to left on the same demand

curve.

It is shown as a backward or leftward 

shift in the demand curve.

Concept

It is a quantity demand concept.

 It is a demand concept.

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