CA Foundation · Business Economics · Theory of Demand and Supply
During the festival season, the demand for sweets in a city rises at every price level. In a demand-supply diagram, how is this change best described?
This is an increase in demand. More is demanded at every price, so the whole demand curve shifts rightward because of a non-price factor such as the festival season. Extension and contraction describe movements along the curve caused only by own-price changes.
- AContraction of demand
- BExtension of demand
- CIncrease in demandCorrect
- DDecrease in quantity demanded
Explanation
Demand rising at every price level means the whole curve moves to the right. This is termed an increase in demand, caused here by a change in tastes and occasion. Extension and contraction refer to movements along a given curve caused by own-price changes.
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