Question
Explain the distinction between decrease in supply and contraction in supply. Use diagram.
✓
Answer
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S. No
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Basis
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Contraction in Supply
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Decrease in Supply
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1.
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Causes
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Contraction of supply is caused by fall in price of the given commodity, other things remaining the same.
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Decrease in supply is caused by factors other than the price of the commodity, i.e., rise in price of other commodity, technology, rise in price of inputs etc.
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2.
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Supply curve
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Contraction of supply is denoted by downward movement along a supply curve.
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Decrease in supply of a commodity is denoted by leftward shift of the supply curve.
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3.
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Diagram
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 |
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