Change in Supply (i) What is movement along the supply curve? |
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| Ans : When there is change in quantity supply only because of change in price other things remaining constant then it is known as movement along the supply curve. It explains how the price- quantity combination moves from one point to another of the same supply curve.
When change in supply is caused by change in price then it is called extension or contraction in supply. The concepts of extension (expansion) or contraction in supply are explained below:
a) Extension in supply:- When quantity supply for a commodity increases due to increase in price, it is known as extension in supply. In this case the supplier moves upward along the same supply curve.
b) Contraction in supply:- When quantity supply for a commodity decreases due to decrease in price, it is known as contraction in supply. In this case the supplier moves downward along the same supply curve.
The concept of movement along the supply curve can be explained with the following diagram:
In the given diagram, ox-axis represents quantity supply and oy-axis represent price. SS is the supply curve which slops upward from left to right. At initial price OP, quantity supply is OM. At this situation the supplier is at point ‘A’ of the supply curve. When price increases from OP to OP₁, quantity supply increases from OM to OM₁. At this situation the supplier is at point ‘B’ of the supply curve. This movement from point ‘A’ to point ‘B’ is known as extension in supply.
Again when price decreases from OP to OP₂, the quantity supply decreases from OM to OM₂. At this situation the supplier is at point ‘C’. This movement from point ‘A’ to point ‘C’ is known as contraction in supply.
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