What do you mean by Expansion and Contraction in Demand?

We have studied under the law of demand that other things remaining the same, if price of a commodity rises, its demand decreases and if price of the commodity falls, its demand increases.

When quantity demanded of a commodity increases as a result of the fall in the price, it is called extension (or expansion) in demand (a movement down the demand curve) and when the quantity demanded decreases as a result of an increase in the price of the commodity, it is called contraction in demand (a movement up the demand curve). Thus, extension and contraction in demand imply change in quantity demanded due to change in the price of the commodity, other things remaining the same.

Extension in demand is shown in Fig. 1.7. At price OP1, OQ1 quantity of the commodity is demanded. If the price falls to OP2, quantity demanded of the commodity increases to OQ2 . Q1 Q2 is the extension in demand, which results from a fall in the price of the commodity from OP1 to OP2.

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Contraction in demand is shown in Fig. 1.8. At price OP,, the quantity demanded of the commodity is OQ,. When the price of the commodity rises to OP2, the quantity demanded of the commodity falls to OQ2. Q2 Q, is the contraction in demand resulting from an increase in the price from OP, to OP2

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Both extension and contraction in demand are represented by a movement (moving down and up respectively) along the same demand curve. In these cases, there is no shift in the demand.