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Questions
What is contraction in demand?
What is meant by contraction of demand?
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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.
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When price of Giffen goods fall, the demand for it increases.
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When price of Giffen goods fall, the demand for it increases.
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When price of Giffen goods fall, the demand for it increases.
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