Question

Explain as fully as possible the difference between an increase in demand and an increase in quantity demanded. Provide two reasons for an increase in demand. Provide one reason for an increase in quantity demanded. How will an increase in demand change the equilibrium price and quantity? Graphs are optional.

Answer 1

Difference between an increase in demand and an increase in quantity demanded

Increase in demand - Increase in demand takes place due to change in other variables than demand. These variables are income of consumer, price of related goods, tastes and preferences. Due to increase in demand, demand curve shift upwards to the right.

Increase in quantity demanded- It is a situation when quantity demanded extended due to fall in price. It represents downward movement along the same demand curve. Increase in quantity demanded held other variables constant.

Two reasons for increase in demand - Increase in demand takes place due to change in income of consumer, tastes and preferences.

In case income of the consumer increases , demand increases and shift upwards. There is positive relation in income and demand.

Taste and preferences- As the taste and preferences for particular good increases , demand of good increases.

One reason for increase in quantity demanded-Increase in quantity demanded held due to fall in price. As the law of demand , price and quantity demanded are inversely related.

Increase in demand impact on equilibrium price and quantity- Due to increase in demand , demand curve shift upwards to the right. Due to that there is change in equilibrium price and quantity . Due to increase in demand equilibrium price and equilibrium quantity increased.