Movement Along demand curve and shift of demand curve

1) Change in Quantity demanded

When the amount demanded of a commodity changes (rises/falls) as a result of change in its own price, while other determinants of demand (like income, tastes and preferences etc.) remain constant, it is known as change in quantity demanded.
They are of two types:

a) Extension of demand :
When the quantity demanded of a commodity rises due to fall in its price, other things remaining the same (i.e. factors that affects demand like income,tastes and preferences etc), it is called ‘rise in quantity demanded’ or ‘extension of demand’.

b) Contraction of demand :
When the quantity demanded of a commodity falls due to rise in its price, other things remaining the same (i.e. factors that affects demand like income,tastes and preferences etc), it is called ‘fall in quantity demanded’ or ‘contraction of demand’.

demand curve

As explained in the above graph,when the price is OP, quantity demanded is OQ.

When the price rises to OP₁, quantity demanded falls to OQ₁.
This movement from A to B in upward direction on the demand curve DD is the contraction of demand,since quantity demand falls (contracts) due to rise in price.
When the price falls to OP₂, quantity demanded rises to OQ₂.This movement from A to C  in downward direction on the demand curve DD is the extension of demand, since quantity demand rises (extend) due to fall in price.

Extension and Contraction of demand is also called as movement along the demand curve.

2) Change in demand – Shift in demand curve

When the quantity demanded of a commodity rises or falls because of change in factors other than the own price of the commodity(i.e. factors that affects demand like income,tastes and preferences etc) it is called change in demand. 
They are of two types:

a) Increase in demand:
Increase in demand refers to a situation when the consumers buy larger amount of  commodity at the same price because of change in factors other than the own price of the commodity.

Factors that cause change in demand are:

i) Income – when the income of the consumer increase, quantity demanded increase as his purchasing power has increase.
so with no change in the price of the commodity, quantity demand rises due to increase in consumer’s income.

ii) Price of substitutes: with the rise in the price of substitute, the demand for the commodity will rise, as now it is cheaper as compared to its substitute.
For example: if the price of coffee rise, which is the substitute of tea, quantity demanded for tea will increase as it is relatively cheaper now.

iii) Price of Complements: With the fall in the price of the complements, the demand for the commodity rises.
For example: if the price of petrol falls, demand for cars will increase.

iv)  Favourable change in tastes and preferences also increase the quantity demanded of a commodity.

v) Price expectation: If the consumer is expecting a rise in price of a commodity in future, the current demand for the commodity will rise today, so as to avoid high price in future.

vi) Increase in population will also lead to increase in quantity demanded due to increase in number of consumers.

We now see how these factors causes a change in demand curve by the below graph

demand increase

At price OP, quantity demanded is OQ by the consumer, now if consumer’s income increase, his purchasing power has increase and he will demand more.

So with the same price OP, quantity demanded increases to OQ₁.

Due to this change there is a rightward shift as indicated by the arrow, of the whole demand curve DD to D₁D_{1 .} This is Increase in demand.

b) Decrease in demand:
Decrease in demand refers to a situation when the consumers buy small amount of commodity at the same price because of change in factors other than the own price of the commodity.

Factors that cause change in demand are:

i) Income – when the income of the consumer decrease, quantity demanded decrease as his purchasing power has reduced.
So with no change in the price of the commodity, quantity demand decrease due fall in consumer’s income.

ii) Price of substitutes: with the fall in the price of substitute, the demand for the commodity will fall,as now it is costlier as compared to its substitute.
For example: if the price of coffee falls,which is the substitute of tea,quantity demanded for tea will decrease as it is relatively costlier  now.

iii) Price of Complements: With the rise in the price of the complements,the demand for the commodity falls.
For example: if the price of petrol rises,demand for cars will decrease.

iv) Unfavourable change in tastes and preferences also decrease the quantity demanded of a commodity.

v) Price expectation: If the consumer is expecting a fall in price of a commodity in future, the current demand for the commodity will fall today, so as to purchase the commodity at lower price in future.

vi) Decrease in population will also leads to decrease in quantity demanded due to decrease in number of consumers.

We now see how these factors causes a change in demand curve by the below graph

decrease demand

At price OP, quantity demanded is OQ by the consumer, now if consumer’s income falls, his purchasing power has reduced and he will demand less.

So with the same price OP, quantity demanded decreases to OQ_1, from OQ.

Due to this change there is a leftward shift as indicated by the arrow, of the whole demand curve DD to D₁D_{1 .} This is Decrease in demand.

Distinction between Extension of demand and increase in demand

	Extension of demand	increase in demand
1	It refers to large quantities being purchased due to fall in the price of the commodity	It refers to large quantities being purchased at the same price
2	It is due to fall in a commodity’s own price.	It is due to change in‘other factors’affecting demand
3	It shows downward movement along the same demand curve.	It shows a rightward shift of the whole demand curve.

Distinction between Contraction of demand and decrease in demand

	Contraction of demand	decrease in demand
1	It refers to less quantities being purchased due to rise in the price of the commodity	It refers to less quantities being purchased at the same price
2	It is due to rise in a commodity’s own price.	It is due to change in‘other factors’affecting demand
3	It shows upward movement along the same demand curve.	It shows a leftward shift of the whole demand curve.