Question

With the help of a diagram, define a decrease in supply.

Answer 1

When supply of a commodity falls due to factors other than the price of the commodity, it is called a decrease in supply. Graphically, it implies a leftward shift of the supply curve of the commodity. In the figure, SS is the original supply curve. At OP price, OQ quantity is supplied. Now, when supply decreases, the SS curve shifts to S₁S₁. Quantity supplied decreases from OQ to OQ₁ at the same price of OP.