The statement that as price falls, demand rises, but as demand rises, price rises, can be defended.
The first part of the statement, i.e. as price falls, demand rises shows the general
behaviour of the consumer in the market. This is simply a forward movement along a demand curve.
But, there may also be a situation when increase in demand leads to increase in price. When the supply of a commodity remains unchanged and demand increases due to factors others than price such as increase in income of the consumer or change in taste and preference of the consumer, the demand curve shifts upward and it raises the market price as shown in figure B.
Figure A shows when price falls from OP to {{OP}_{1}}, demand rises to
{{OQ}_{1}}.
This is extension of demand. Figure B shows when there is increase in demand and demand curve shifts upward to${{D}{1}}
{{D}{1}},
price rises to {{OP}_{1}}$.
