Market supply

Market supply at any price is the sum of the quantities that all the firms supply at that price. On a graph, the firms' supply curves are added horizontally.

Firms may have different shut-down prices. Below the lowest one, no firm supplies, so market supply is zero; between the lowest and the next, only the first firm supplies; and so on.

Example: firm 1's supply is S1 = p − 4 (for p ≥ 4), and firm 2's is S2 = 2p − 16 (for p ≥ 8).

• Below ₹4, market supply is 0.
• Between ₹4 and ₹8, only firm 1 supplies: Sm = p − 4.
• At ₹8 and above, both supply: Sm = (p − 4) + (2p − 16) = 3p − 20. At p = 10, that is 6 + 4 = 10.

Market supply is worked out for a given number of firms. If more firms enter, market supply shifts to the right; if firms leave, it shifts to the left.