Differentiate between decrease in supply and contraction in suppl…

Question

Differentiate between decrease in supply and contraction in supply (decrease in quantity supplied).

✓

Answer

S. No.	Basis	Increase in Supply		Expansion in Supply
1.	Meaning	Decrease in Supply A decrease in supply means that producers now supply less at a given price level.		Contraction in Supply It states that fall in quantity supplied due to the fall in price of the commodity.
2.	Cause	It states that fall in quantity supplied due to the fall in price of the commodity.		It is caused by rise in price of the commodity.
		(ii) Rise in the prices of other goods.
		(iii) When the technology becomes outdated.
		(iv) Change in objective of producer (decrease supply at the same price).
		(v) Taxation policy of government rises.
3.	Schedule	Price	Supply	Price	Supply
		4	10	2	1
		4	8	1	8
4.	Diagram

Numerical problems on Calculation of elasticity of supply (When both price and quantity are given)

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	Rs in Crores
Net domestic product at factor cost	8000
Net national Income from abroad	200
Undistributed income	1000
Corporate tax	500
Interest received by family	1500
Interest paid by Family	1200
Transfer payment	300
Personal tax	500