Difference between Contraction in Demand and Decrease in Demand
Contraction in Demand and Decrease in Demand are cases of Movement along the same Demand Curve and Shift in Demand Curve respectively.
What is Contraction in Demand?
When there is a fall in the quantity demanded of a commodity because of an increase in its price by keeping other factors constant, it is known as Contraction in Demand. In simple terms, the demand for a commodity fall because of an increase in its price. Contraction in demand results in an upward movement along the same demand curve.
Example:
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What is Decrease in Demand?
When there is a fall in the quantity demanded of a commodity because of any factor other than the price of the commodity, it is known as Decrease in Demand. In simple terms, the demand for a commodity decreases at the same price, because of changes in other factors. A decrease in demand results in a leftward shift in the demand curve.
Example:
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Difference between Contraction in Demand and Decrease in Demand
Meaning |
A fall in the quantity demanded of a commodity because of an increase in its price by keeping other factors constant is known as Contraction in Demand. |
A fall in the quantity demanded of a commodity because of any factor other than the price of the commodity is known as Decrease in Demand. |
Effect on Demand Curve |
The effect of contraction in demand is an upward movement along the same demand curve. |
The effect of decrease in demand is a leftward shift in the demand curve. |
Price Effect |
There is a negative price effect; i.e., the demand for a commodity decreases when its price rises. |
There is no price effect; i.e., the demand for a commodity decreases at the same price. |
Reason |
The demand for a commodity contracts because of an increase in its price. |
The demand for a commodity decreases because of an unfavourable change in other factors such as increase in the price of complementary goods, decrease in the price of substitutes, etc. |
Example |
If the demand for a commodity X falls from 200 units to 140 units because of an increase in its price from ₹15 to ₹20, then it is a case of Contraction in Demand. |
If the demand for a commodity X falls from 200 units to 140 units with constant price of ₹15 because of changes in other factors like decrease in the price of the substitute good, then it is a case of Decrease in Demand. |
Last Updated :
09 Jan, 2024
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