Page 114 - DECO401_MICROECONOMIC_THEORY_ENGLISH

Unit-6: Theory of Demand and Elasticity of Demand

3. Decrease in price of complementary goods Notes
4. Favorable changes in taste, likes and preferences
5. Expectation of decreasing price in future
6. Increase in population (buyers)

Self Assessment

Multiple choice questions:
4. Normal goods are goods whose demand increase with the increase in income of ........................... .
(a) consumer (b) person (c) replacement (d) common man
5. Inferior goods are goods whose demand is ................... on increasing income of consumer.
(a) decrease (b) less (c) increase (d) more
6. Decrease in demand is known as .................. to increase in price.
(a) contraction (b) curve (c) movement (d) distribution
7. Increase in demand is done when it is bought at stable price of goods ............... .
(a) in more quantity (b) in less quantity (c) in balanced quantity (d) nothing

6.6 Distinction between Extension and Increase in Demand

Extension of demand means, growth of demand due to
fall in price of a commodity. It is shown by the movement Distinction between Extension
at the same demand curve. On the other side, increase in and Increase in Demand
demand means growth of demand due to the changes in
other determinants of demand (such as tastes, income of Demand of any commodity is extended
when its more quantity is bought to fewer
consumer, price of replacement goods) on the stable price. prices. Increase in demand occurs when by
It is shown by the shift or slip of complete demand curve. stable price of commodity its more quantity
Figure 6.11 is clearing the distinction between extension is bought.
and increase in demand. DD is initial demand curve. It is
known by Fig. 6.11 that two different growths are possible in the demand at point ‘A’ of DD demand
curve. First is that quantity of demand to become OQ to OQ on point ‘B’ with movement to point
1
‘A’ of same demand curve. This growth in quantity demanded is due to price to be decreased from

Fig. 6.11

Y
D
D 1
Increase in
Demand
P C
Price (`) Extension in
Demand
P
1
D 1
O D X
Q Q
1
Quantity

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