What cause movements along a Demand Curve?

 

 Learning Contents:                                                            

·            Extension of Demand

·            Contraction of Demand  

Introduction

As the Law of Demand states, other things remaining constant, when the price of a commodity falls, consumers buy more of it; if the price of a commodity rises, they buy less of it. Therefore, the price may either go up or down and this cause the consumer to purchase less or more of a commodity respectively.

Movements along the demand curve means moving ‘up or down’ the demand curve. When Price becomes the only reason for a change in the demand for a commodity, it is called the movements along the demand curve. Such movements along the demand curve are known as an extension of demand (downward movement) and contraction of demand (upward movement).  A movement along the demand curve is also known as a change in the quantity demand for a commodity. The change in quantity demand is classified into two types:

1. Extension of Demand

(Downward movement along a demand curve)

Extension of demand refers to a situation when quantity demand for a commodity increases due to fall in the price of a commodity. It is also known as an increase in quantity demand. For e.g. when the price of ice cream is ₹ 10 per unit, the consumer buys 5 units of it. When its price falls to ₹ 5 per unit, the consumer extends his demand to 10 units of ice cream.

                       Demand Schedule: Extension of Demand 

Extension of demand is shown by the movement downward and to the right from A to B along the demand curve in figure 1.

 

1.   Contraction of Demand

(Upward movement along a demand curve)

Contraction of demand refers to a situation when quantity demand for a commodity decreases due to the rise in the price of a commodity. It is also known as the decrease in quantity demand. For e.g. when the price of ice cream is ₹ 5 per unit, the consumer buys 10 units of it. When its price rises to ₹ 10 per unit, the consumer reduces his demand to 5 units of ice cream.

       Demand Schedule: Contraction of Demand 

Contraction of demand is shown by the movement upward and to the left from B to A along the demand curve in figure 2.

 

Let us see what we have learnt!

Multiple choice questions (Choose the correct answer)

1. Movement along the demand curve occurs due to change in:

a. own price of the commodity

b. determinants of demand, other than own price of the commodity

c. both a. and b.

d. none of these.

2. A decrease in quantity demanded is, graphically, represented by:

a. A leftward shift in the demand curve.

b. A rightward shift in the demand curve.

c. A movement up and to the left along a demand curve.

d. A movement down and to the right along a demand curve.

3. A change in the price of a good

a. shifts the good's demand curve but does not cause a movement along it.

b. does not shift the good's demand curve but does cause a movement along it.

c. shifts the good's demand curve and also causes a movement along it.

d. neither shifts the good's demand curve nor causes a movement along it.

4. A reduction in the price of a good

a. does not shift the good's demand curve leftward but does decrease the quantity demanded.

b. shifts the good's demand curve leftward but does not decrease the quantity demanded.

c. shifts the good's demand curve leftward and also decreases the quantity demanded.

d. neither shifts the good's demand curve leftward nor decreases the quantity demanded.

5. Which of the following would NOT shift the demand curve for pepsi?

 a. a change in tastes for Pepsi

 b. a decrease in the price of coke

c. an increase in income

d. a change in the price of  Pepsi

6. An increase in the price of cooking gas will cause the demand for cooking gas to:

a. rise

b. fall

c. remain the same

d. none of these

 

7. An increase in quantity demanded is, graphically, represented by:

a. A leftward shift in the demand curve.

b. A rightward shift in the demand curve.

c. A movement up and to the left along a demand curve.

d. A movement down and to the right along a demand curve.

8. When there is a movement along the demand curve from one point to another resulting from a reduction in price, which of the following statement is true:

a. The lower price increases sales; hence, there is an increase in demand.

b. Since individuals buy whatever they desire, price changes have no effect on the quantity demanded.

c. A price decrease causes a demand increases but price increases only causes a change in quantity demanded.

d. Movements along demand curves are termed changes in quantity demanded rather than changes in demand.

 

Answer Key

1.a	2.c	3.b	7.d
4.d	5.d	6. b	8.d

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