Movement Along the Demand Curve (Extension and Contraction)
A single downward-sloping demand curve with three points: a fall in the good's own price moves from A down the curve to B (an extension of demand), and a rise moves from A up the curve to C (a contraction of demand). The curve itself does not shift.
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This diagram shows a single demand curve, D, and what happens when the price of the good itself changes. The market starts at point A, with price P1 and quantity demanded Q1. If the price falls to P2, consumers move down the curve to point B and the quantity demanded rises to Q2: this is an extension of demand. If the price rises to P3, consumers move up the curve to point C and the quantity demanded falls to Q3: this is a contraction of demand. In both cases the curve itself stays where it is. Only a change in the good's own price causes a movement along the demand curve. A change in any of the conditions of demand, such as income, tastes, or the price of a substitute or complement, shifts the whole curve to the left or right instead.
Key points
- Only a change in the good's own price causes a movement along the demand curve.
- A fall in price causes an extension of demand: a movement down the curve to a higher quantity demanded.
- A rise in price causes a contraction of demand: a movement up the curve to a lower quantity demanded.
- A movement along the curve is a change in quantity demanded, not a change in demand.
- Changes in the conditions of demand, such as income, tastes or the prices of related goods, shift the demand curve instead of causing a movement along it.
- The movement follows the law of demand: price and quantity demanded move in opposite directions.
Exam tip
When you use this diagram, start by naming the cause. If the good's own price has changed, the answer is a movement along the existing demand curve: a fall in price is an extension of demand and a rise in price is a contraction of demand. Use the words "quantity demanded" for a movement along the curve, and keep the word "demand" for the whole curve. If anything else has changed, such as income or the price of a substitute, draw a shift of the curve instead.
Common mistakes
The most common mistake is to shift the demand curve when the good's own price changes. A change in the good's own price only moves the market along the existing curve; the curve shifts only when a condition of demand changes. Another is to mix up the terms: a fall in price causes an extension (quantity demanded rises), a rise in price causes a contraction (quantity demanded falls). A third is to say "demand rises" for an extension; strictly, the quantity demanded rises, and "an increase in demand" means the whole curve has shifted to the right.
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