Change in Supply (Extension and Contraction of supply):
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When more units are supplied at a higher price, it is called ‘extension of supply’. When fewer units are supplied at a lower price, it is called ‘contraction in supply’. It is illustrated in Fig. 2.



When the price is OP, OQ is supplied. When price increases to OP`, the producer will supply OQ` units. The movement from OQ to OQ` shows the extension of supply. Original price is OP and original supply is OQ. When price falls to OP” the producer will supply OQ” units. The supply has contracted from OQ to OQ”.