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Increase and decrease in demand

In case of expansion and contraction of demand, we have seen that the change takes place as a result of changes in price, all other factors remaining constant. When all the other factors influencing demand also change, there is an increase or decrease in demand and the demand curve shifts either to its right or left. If the income of a consumer rises, he would be able to purchase the commodities which he earlier could not afford. This would result in an increase in demand and therefore, the demand curve shifts to the right. If, on the other hand, the goods are out of fashion, the demand of that good will decline, resulting in the shift of the demand curve to the left.
 
Demand may also increase and decrease due to the following reasons:
 

Increase in demand

(A shift in the demand curve towards the right)

  •  Rise in income
  •  Rise in the price of substitutes
  • Fall in the price of a complement
  • Favourable change in tastes of a good
  • Increase in population
  • Goods in fashion

Decrease in demand

(A shift in the demand curve towards the left)

  • Rise in income
  • Rise in the price of substitutes
  • Fall in the price of a complement
  • Favourable change in tastes of a good
  • Increase in population
  • Goods in fashion

 

Example

If say, jeans are in fashion, there is likely to be an increase in demand for jeans and hence, the demand curve shifts to the right. If on the other hand, jeans are not in fashion, there would be a decrease in demand and hence, the demand curve will shift to the left. Let us illustrate this with the help of a diagram:

Increase in Demand

When demand changes not because of price but because of changes in other determinants of demand, it is a case of either increase or decrease in demand. “Increase in demand means more demand at same price”. In case of increase in demand, the demand curve shifts to the right hand side or shifts away from the origin.
 
Description: 17282.png
 
Original price ₹ 5
Original Quantity 10 Units
 
Earlier the price was ₹ 5 and consumer was buying 10 units of commodity X, now price being the same, if the income level of the consumer increases, his purchasing capacity also increases, due to which, though the price is same ₹ 5, now consumer will be able to purchase 20 units of commodity X, as a result of this, the demand curve shifts to the right hand side. This is known as increase in demand.

Decrease in Demand

Decrease in demand means – “Less demand at same price”. In case of decrease in demand, the demand curve shifts towards the origin or to the left hand side.
 
The following diagram explains decrease in demand.
 
Description: 17975.png
 
Original Price = ₹ 5
Original quantity demanded 20 units
Original demand curve = DD
 
Earlier consume used to buy 20 units and due to fall in his income, now consumer is capable of buying only 10 units. In this case the demand curve shift to the left hand side or towards origin.




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