Distinguish between contraction of demand and decrease in demand.

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Solution

PLANATION
Basis Contraction of demand Decrease in demand
Meaning It refers to a situation where the demand of the commodity decreases due to change in the price of the given commodity other factors remaining constant. It refers to a situation where the demand of the given commodity decreases due to change in other factors of demand, price of the commodity remaining constant.
Change in demand curve There is upward movement of the point along the same demand curve. The entire demand curve shifts in the leftward direction.
Price of the commodity Price of the given commodity increases. Price of the commodity remains constant.
Other factors of demand Other factors of demand remain constant. Other factors of demand changes such as the income of the consumer decreases, price of substitute goods decreases or price of complementary goods increases.

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