Extension and Contraction of Supply:

Other factors remaining constant, as the price increases, the quantity supplied increases. This is known as the extension of supply, i.e., when prices increase from P0 to P2, the quantity supplied also increases from Q0 and Q2. As the price decreases, the quantity supplied also decreases. This is known as a contraction of supply. In the figure, the quantity supplied declines from Q0 and Q1, if price decreases from P0 to P1. The extension and contraction of supply take place in the same supply curve.