Contraction of demand is the result of :

Question

Accepted Answer

The correct option is 2:

Contraction of demand refers to a movement *along* the demand curve, specifically an upward movement, resulting in a fall in the quantity demanded. This phenomenon occurs exclusively due to a change in the product’s own price, with all other factors (like income, tastes, and prices of related goods) remaining constant, a condition known as *ceteris paribus*. According to the Law of Demand, when the price of a good increases, the quantity demanded for that good decreases. Therefore, an increase in the price of the goods concerned directly leads to a contraction of demand.

The incorrect option is 1:
An increase in the price of other goods (substitutes or complements) causes a *shift* in the entire demand curve, not a movement along it (which is a contraction). For example, if the price of a substitute rises, the demand curve for the good concerned will shift to the right (increase in demand).

The incorrect option is 3:
A decrease in the number of consumers causes the entire market demand curve to *shift* to the left (a decrease in demand). This is a change in a non-price determinant of demand, which is fundamentally different from a contraction of demand.

The incorrect option is 4:
A decrease in the income of purchasers causes a *shift* in the demand curve. For normal goods, a decrease in income shifts the demand curve to the left (a decrease in demand). This is also a non-price factor and does not cause a contraction.