Movement along a Demand Curve and Shift in the Demand Curve

Abstract

When due to change in commodities price, quantity demanded of change, it is shown by different points on the same demand curve and known as movement along a demand curve or change in quantity demanded. It can be extended or contracted. But when quantity demanded changes due to changes in factors other than the price of the commodity, the entire demand curve shifts either upward (rightward) or downward (leftward). This is called Shifting in demand curve.

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Movement along a demand curve and Shift in the demand curve

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Change in quantity demanded and Change in demand

Change in quantity demanded means an increase or decrease in the quantity of a commodity when its own price falls or rises, other things remaining constant. It is shown by movement along the demand curve. Change in demand, on the other hand, means to increase or decrease in quantity demanded of a commodity when there is a change in other determinants of demand, other than the own price of the same commodity. It is expressed through shifts in demand curve-forward shift or backward shift.

(1) Movement along a Demand Curve or Change in Quantity Demanded: When due to change in its own price alone, quantity demanded of a commodity change, it is shown by different points on the same demand curve. It is also called movement along a demand curve or change in quantity demanded. An increase in quantity demanded of a commodity due to a fall in its own price is called Extension of Demand and a decrease in quantity demanded due to a rise in its own price is called Contraction of Demand.

(2) Shift in Demand Curve or Change in Demand: In this case, the entire demand curve shifts either upward (rightward) or downward (leftward). This type of change takes place when quantity demanded changes due to changes in factors other than the own price of the same commodity, such as a change in income, fashion, etcetera. It is also called the change in the level of demand. When due to change in these other factors, demand falls, it is called Decrease in Demand and when demand rises, it is called Increase in Demand.

(1) Extension and Contraction of Demand or Change in Quantity Demanded

When a change in quantity demanded of a commodity is caused by the change in its own price, it is called extension or contraction of demand or change in quantity demanded.

(i) Extension of Demand: Extension of demand refers to a rise in quantity demanded as a result of a fall in the own price of the commodity, other things remaining the same. As shown in Table 3, when the price of ice cream is rupees 5 per unit demand is for 1 unit of ice cream, when it falls to rupees 1 per unit demand extends to 5 units of ice cream.

The extension of demand can also be illustrated with the help of Fig. 4.

In Fig. 4, AB is the demand curve of ice cream. When the price of ice cream is rupees 5 per unit demand is for 1 unit of ice cream. The consumer is at point 'A' of the demand curve. As the price of ice cream falls to rupees 1 per unit demand extends to 5 units of ice cream and the consumer moves to point 'B' of the demand curve. Movement along the demand curve from higher point (A) to lower point (B) is called the extension of demand.

(ii) Contraction of Demand: Contraction of demand refers to a fall in quantity demanded as a result of a rise in the own price of the commodity other things remaining the same. As shown in Table 4, when the price of ice cream is rupees 1 per unit demand is for 5 units of ice cream, when it rises to rupees 5 per unit demand contracts to 1 unit of ice cream.

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