Contraction of supply is when the supply of a commodity decreases due to fall in its price and other things being constant. It is caused by fall in the price of the commodity.

There is a downward movement from A to B as shown in the diagram along the supply curve which is due contraction of supply. It is explained in the given diagram, as with a fall in price from OP to OP1 , quantity supplied falls from OQto OQ1 .