I shoot in all sorts of locations, most of which are more cramped than I want. So I bring along my 6-foot wide rolls of white, black, and colored photographer's backdrop paper and do the best I can. Fortunately, if I shoot on black or white backgrounds, I can increase the space later in Photoshop CS (any of the versions) using the Canvas Size dialog box (Image > Canvas Size). This technique works best if you keep your background whites bright, or your blacks saturated.
In the top image you'll see that I ran out of space and don't have much background area around the subject. This can be a particular problem if you need to add another element to the shot, such as type. But the fix is easy. Just open the Canvas Size dialog box and adjust the settings as I have here.
Notice how I select the bottom/center box for the anchor. That adds white space to the top and sides of the image. You can control this by selecting the anchor that best suits your needs for that picture.
I usually work with white or black as the Canvas Extension Color, but you have nearly unlimited options via that popup menu at the bottom of the dialog box. Once you have your settings in place, click OK, and your backdrop suddenly becomes much more spacious.
I dug around a bit and found a good tutorial that also shows a similar technique for Photoshop Elements. Check out the article titled, Add Space to Your Studio in Photoshop. About half way into the article the author shows the technique for Elements.
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