So are you saying that when you downshift, the chain won't fall to the smallest gear? If that is the case, has the derailleur been bent by having the bike dropped on the drive side which could have knocked the derailleur out of whack? If everything else seems normal and there was no impact, then what I would do is try loosening the screw gently corresponding to the small gear in question (H for the rear derailleur, L for the front derailleur). That might allow the derailleur to drop all the way to its loosest position. Don't over loosen or the chain will drop off the gears altogether. If it still isn't working right, you might have to release the cable hold down for the derailleur in question to make sure that it isn't a cable problem. If after you loosen the cable stop, try downshifting and seeing if the shifter will downshift all the way down to its lowest point.
Check the cable housing for kinks or possible deterioration in housing and resulting collapse of housing.