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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.
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.
State with reason whether you agree or disagree with the following statement:
There are no exceptions to the law of demand.
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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)
State with reason whether you agree or disagree with the following statements:
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 statements :
When price of Giffen goods fall, the demand for it increases.
'Price is an indicator of quality'. The statement applies to ______.
In which exception to the law of demand does the consumer equate price and quality.
“The inverse relationship between price and quantity demanded does not hold good in many cases.”
- Justify the above as Yes or No.
- If justified, explain in brief the Giffen Effect.
State with reasons whether you agree or disagree with the following statement:
When price of Giffen goods fall, the demand for it increases.
State two circumstances under which the demand curve slopes upwards to the right.
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?
What happens to the demand for necessities like salt or electricity when their prices increase?
