Demand Extension
Economics Theory >> Microeconomics Assignments
We have studied above the demand schedule, demand curve and law of demand. All these show that when price falls quantity demanded of it rises, and when its price rises, its quantity demanded falls, other things remaining the same. When as a result of changes in price the quantity demanded rises or falls, extension or contraction in demand is said to have taken place. Therefore, in economics the extension and contraction in demand are used when the quantity demanded rises or falls as a result of changes in price and we move along a given demand curve and when the quantity demanded of a good rises due to fall in price, it is called extension of demand. For instance suppose the price of bananas in the market at any given time is $. 12 per dozen and a consumer buys one dozen of them at a price. Now if other things such as tastes of consumer, now the consumer buys 2 dozen bananas, then extension in demand is said to have occurred. On the half a dozen of bananas rises to $. 15 per dozen and consequently the consumer now buys half a dozen of the bananas, then contraction is demand is said to have occurred.
It should be remembered that extension and contraction in the demand takes place as a result of changes in the price alone when other determinants of demand such as tastes, income, propensity to consume and prices of the related goods remain constant. These other factors remaining constant means that the demand curve remains the same, that is, it does not change its position; not only the consumer moves downward or upward on it.
The extension and contraction in demand is illustrated. Assuming other things such as income, tastes and fashion, prices of related goods remaining constant, a demand curve DD goods remaining constant, a demand curve DD has been drawn. It will be seen in this fig. that when the price of good is OP then the quantity demanded of the good is OM. Now if the price of the good falls to OP’ the quantity demanded of the goods rises to ON. Thus there is extension in demand by the amount by ML. we thus see that as a result of changes in price of a good the consumers move along the given demand curve; the demand curve remains the same and does not change its position.
Economics Theory >> Microeconomics Assignments
We have studied above the demand schedule, demand curve and law of demand. All these show that when price falls quantity demanded of it rises, and when its price rises, its quantity demanded falls, other things remaining the same. When as a result of changes in price the quantity demanded rises or falls, extension or contraction in demand is said to have taken place. Therefore, in economics the extension and contraction in demand are used when the quantity demanded rises or falls as a result of changes in price and we move along a given demand curve and when the quantity demanded of a good rises due to fall in price, it is called extension of demand. For instance suppose the price of bananas in the market at any given time is $. 12 per dozen and a consumer buys one dozen of them at a price. Now if other things such as tastes of consumer, now the consumer buys 2 dozen bananas, then extension in demand is said to have occurred. On the half a dozen of bananas rises to $. 15 per dozen and consequently the consumer now buys half a dozen of the bananas, then contraction is demand is said to have occurred.
It should be remembered that extension and contraction in the demand takes place as a result of changes in the price alone when other determinants of demand such as tastes, income, propensity to consume and prices of the related goods remain constant. These other factors remaining constant means that the demand curve remains the same, that is, it does not change its position; not only the consumer moves downward or upward on it.
The extension and contraction in demand is illustrated. Assuming other things such as income, tastes and fashion, prices of related goods remaining constant, a demand curve DD goods remaining constant, a demand curve DD has been drawn. It will be seen in this fig. that when the price of good is OP then the quantity demanded of the good is OM. Now if the price of the good falls to OP’ the quantity demanded of the goods rises to ON. Thus there is extension in demand by the amount by ML. we thus see that as a result of changes in price of a good the consumers move along the given demand curve; the demand curve remains the same and does not change its position.
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