Advertisements
Advertisements
Questions
What is contraction in demand?
What is meant by contraction of demand?
Advertisements
Solution
Contraction of demand refers to a fall in the quantity demanded due to a rise in the price of a commodity, other factors remaining constant. It is also known as a decrease in quantity demanded. It can be illustrated with the help of an example and a diagram.
| Price of X Per Unit (₹) | Quantity Demanded (X) (Unit) |
| 3 | 30 |
| 5 | 20 |
The figure illustrates the situation of contraction of demand when the price rises from ₹ 3 to ₹ 5, demand falls from 30 to 20 units. This fall in demand results in a movement from point B to point A along the same demand curve, as shown in the figure.
RELATED QUESTIONS
Explain briefly anyone determinant of an exceptional demand curve.
Distinguish between:
Inferior goods and superior goods
Statements that explain Giffen’s paradox:
- It is an exception to the law of demand.
- It is applicable to inferior or low quality goods.
- Demand increases when the prices of inferior goods fall
- It was identified by Prof. Alfred Marshall.
State with reason whether you agree or disagree with the following statement:
When the prices of Giffen goods falls, demand for such goods rises.
Questions:
- Demand Curve D1D1indicates ______ (1m)
- Demand Curve D2D2indicates______ (1m)
- Name the above diagram and explain. (2m)
 |
 |
Questions:
- Diagram’ A ‘represents _____in demand (1m)
- Diagram ‘B’ represents _____in demand (1m)
- In diagram ‘A’ movement of demand curve is in_____ direction (1m)
- In diagram ‘B’ movement of demand curve is in______ direction (1m)
PASSAGE
Mona visits a shopping mall near her residence. She shops for monthly groceries which include rice, wheat, sugar, cooking oil and pulses. She purchases additional quantities of sugar much more than her monthly requirement anticipating that prices may rise in the coming days due to festivities.
She observes two different qualities of tur dal out of which one quality is inferior and the other is superior. She does not purchase the low quality tur dal even though its price is comparatively lower. Instead she prefers to buy superior quality tur dal.
- Identify the exception to the law of demand in the given passage with reference to purchase of additional quantities of sugar much more than monthly requirement anticipating that prices may rise in the coming days due to festivities (1mark)
- Identify the kind of good with reference to low quality tur dal (1mark)
- Express your personal opinion based on the above information. (2 marks)
State with reason whether you agree or disagree with the following statement:
When price of Giffen goods fall, the demand for it increases.
State with reasons whether you agree or disagree with the following statement:
There is a direct relationship between the price of Giffen goods and its demand.
State with reason whether you agree or disagree with the following statements:
When price of Giffen goods fall, the demand for it increases.
When price of Giffen goods fall, the demand for it increases.
State with reason whether you agree or disagree with the following statement:
When price of Giffen goods fall, the demand for it increases.
State with reasons whether you agree or disagree with the following statement:
When price of Giffen goods fall, the demand for it increases.
Mention one exception to the law of demand. Give one point only.
Give one point each of similarity and dissimilarity between Giffen goods and Veblen goods.
What are Giffen goods?
Explain the following diagram with reference to the concept of Giffen goods.
The demand curve can slope upwards from left to right. Give one argument in support of this statement.
Why are prestige good an exception to the law of demand?
Which of the following best describes a Giffen good?
Which exception to the law of demand is primarily based on consumer beliefs about product quality?
Which situation is an example of speculation affecting demand?
