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(iii) When the technology becomes outdated.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