In the diagram 2.7, at point A, the price
OP2 and quantity demanded is OQ2. When price falls to OP3 (movement along the demand curve A to C) the quantity demanded increases to OQ3. If price rises
to OP1 (movement from A to B) quantity
demanded decreases to OQ1
Shift in the Demand Curve:
A shift in the demand curve occurs with a change in the value of a variable other than
its price in the general demand function.
An increase or decrease in demand due to
changes in conditions of demand is shown
by way of shifts in the demand curve.On the left hand side of the diagram the original demand curve is d1 d1, the price is OP1 and the quantity demanded is OQ1
Due to change in the conditions of
demand (change in income, taste or change
in prices of substitutes and /or complements)
the quantity demanded decreases from OQ1
to OQ2. This is shown in the demand curve
to the left. The new demand curve is d1
d1 . This is called decrease in demand.
On the right hand side of the diagram 2.8, the original price is OP1
and the quantity demanded is OQ1. Due to changes in other conditions, the quantity purchased has increased to OQ2 . Thus the demand curve shifts to the right d1 d1. This is called increase in demand.
‘Extension’ and ‘Contraction’ of
demand follow a change in price. Increases
and decreases in demand take place when
price remains the same and the other factors bring about demand changes.