Extension of supply and contraction of supply.
Extension of supply
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Contraction of Supply
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Meaning
A rise in supply caused by rise in the price while other factors remaining constant is called expansion (extension) of supply.
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A fall in supply caused by fall in price while other factors remaining constant is called contraction of supply.
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Equilibrium Point:
In expansion in supply, the equilibrium point moves upwards from the left to the right on the same supply curve.
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In contraction in supply, the equilibrium point moves downwards from the right to the left on the same supply curve.
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