Difference between Extension of Supply and Increase in Supply.

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 Learning Contents:                                                            

·         Difference between Extension of Supply and Increase in Supply.

Difference between Extension of Supply and Increase in Supply.

  Basis

    of

Difference

 

   Extension of Supply

 

  Increase in Supply

 

Meaning

 

When quantity supplied for a commodity rises due to rise in the price, keeping other factors as constant is called an extension of supply.

 

 

When supply for a commodity increases due to change in other factors, keeping price as constant is called an increase in supply.

Causes

Rise in price of the commodity is the

sole cause for the extension of supply.

Several causes such as:

a. Change of firm’s objective from profit maximization to sales maximization.

b. Introduction of a new and advanced technology.

c. Government grants more subsidies and imposes fewer taxes.

d. Increase in number of firms in the industry.

e. Expectation about commodity’s price to fall in future, etc.

 

Effect on Demand     curve

It is shown by an upward movement

from left to right on the same supply

curve.

 

It is shown by the forward or rightward shift

in the supply curve.

Concept

It is a quantity supply concept.


            

It is a supply concept.

 

 

 

 

Drawn as

 

 

 


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