Difference between Extension of Demand and Increase in Demand

 

  Basis

    of

Difference

 

   Extension of Demand

 

  Increase in Demand

Meaning

When quantity demand for a commodity rises due to fall in the price, keeping other factors as constant is called an extension of demand.

When demand for commodity increases due to change in other factors, keeping price as constant is called an increase in demand.

Cause

Fall in price of the 

commodity.

Several causes:

a. Increase in price of the substitute goods.

b. Decrease in price of the complementary goods.

c. Increase in income in case of normal goods.

d. Favorable tastes and preferences are developed.

Effect on Demand curve

It is shown as movement from

left to right on the same 

demand curve.

It is shown as  forward or rightward 

shift in the demand curve.

Concept

It is a quantity demand 

concept.

 It is a demand concept.

Comments

Post a Comment

Popular posts from this blog

SHIFTS & ROTATIONS IN PRODUCTION POSSIBILITY CURVE

Image
    Learning Contents:                                                                Shifts   in   PPC  Rotations in PPC Change in Production Possibility Curve (Shifting/Rotation) The change in the Production Possibility curve can be of two types:  Shift in PPC: PPC will shift when there is a change in productive capacity (resources or technology) with respect to both the goods. Rotation of PPC: PPC will rotate when there is a change in productive capacity (resources or technology) with respect to only one good. Shifts in PPC:   The shift in PPC can either be rightward or backward. These shifts bring about a change in the production of both goods in an economy. The shifts in PPC are of two types: Rightward shift in PPC: Rightward shift in PPC occurs when the resources are increased or technology is improved for the production of both goods that means we can produce more of both the goods. Accordingly, PPC shifts to the right from Initial PPC (AB) to Final PPC (CD).   Re
Read more »500

Income Elasticity: Luxury Goods, Necessity Goods, and Inferior Goods.

Image
  Learning Contents:                                                               ·         Understanding Income Elasticity with respect of luxury goods, necessity goods and inferior goods. The demand for a commodity not only depends on the price of a commodity but also the income level of the consumer. It is a general understanding that a consumer usually prefers to spend more when his income rises and less when his income falls. Sometimes, we might also experience a fall in the demand of certain goods and services even when income rises. Therefore, income elasticity varies with respect to different types of goods and services. The income elasticity measures the percentage change in quantity demanded as a result of percentage change in the income of the consumer. The formula of income elasticity of demand is, The income elasticity measures the demand’s sensitivity or responsiveness to the change in income.   In simple words, it measures to what extent demand changes as a result o
Read more »500

Introduction to Elasticity of Demand

Image
Learning Contents: ·          Concept of Demand and Elasticity of Demand ·          Various Concepts of Elasticity of Demand ·          Concept of Elastic and   Inelastic Demand   Concept of Demand and Elasticity of Demand The Law of demand explains that, keeping other factors constant, demand for a commodity is inversely related to its price. In other words, if the price for a commodity rises, the quantity demand decreases. On the other hand, if price falls, quantity demand increases. Therefore, the concept of demand focuses on the direction of change i.e. how demand changes due to a change in price. In simple words, it explains that demand either increases or decreases as a result of a change in price but it overlooks an important aspect i.e. degree of change in demand i.e. How much or to what extent demand changes due to change in price? The degree of change is explained by the elasticity of demand. Therefore,
Read more »500