Increase unci Decrease In Supply
Economy usually say that, other things being equal, there is a unique demand and supply schedule at any given moment. But other thing~ schlorn remain the same. Hence, change In supply and demand. Supply is said to increase when. at the same price, is offered for sale, or the same quantity is offered at a lower price. 11!c supply is said to decrease, when, al same price, less is offered for sale or the same quantity is offered at it higher price. This is illustrated by the accompanying diagram .
Suppose SS is the supply curve before the change. S’ S’ shows a decrease in supply because at the same price PM ( = P’ M) less is offered for sale, i.e., OM ‘ instead of OM. S” S” shows an increase in supply because at thc same price PM (= P” M”) morc is offered for sale, i.e.,OM” instead of OM. The student should carefully distinguish between the increase in quantity supplied (also known as extension of supply) and increase in supply. Increase in supply means that the whole supply curve has shifted to a new position to the right. It is a new curve altogether, whereas increase in the quantity supplied simply means that more is being offered at a higher price. The supply curve is the same. A movement along the same curve simply indicates changes in quantities of- Icred as a result of a change in price It docs not represent any change in thc supply schedule or conditions of supply.