Consider a market with two firms. The following table shows the supply schedules of the two firms: the column gives the supply schedule of firm 1 and the column gives the supply schedule of firm 2. Compute the market supply schedule.
| Price (Rs) | SS1 (units) | SS2 (units) |
|---|---|---|
| 0 | 0 | 0 |
| 1 | 0 | 0 |
| 2 | 0 | 0 |
| 3 | 1 | 1 |
| 4 | 2 | 2 |
| 5 | 3 | 3 |
| 6 | 4 | 4 |
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Start your 14-day free trial to unlock the full solution →Market supply is the horizontal sum of individual firms’ supply schedules. At each price, we add the quantities supplied by firm 1 and firm 2. The result is a new schedule showing total quantity supplied by the market at each price.
The idea behind market supply aggregation is straightforward: the market supply curve tells us the total quantity that all firms together are willing and able to sell at each price. Since each firm’s supply schedule shows its own quantity at each price, we simply add those quantities across firms for every price level. This is called horizontal summation — we add quantities, not prices.
Why does this work? Because at a given market price, every firm decides how much to produce independently, and the total available in the market is just the sum of their individual outputs. There is no interaction or constraint that prevents us from adding them — each firm’s supply is independent of the other’s at the same price.
Let’s apply this to the data. The table gives us three columns: price, supply of firm 1 (SS₁), and supply of firm 2 (SS₂). For each price, we compute:
Now go row by row:
- At price Rs 0:
- At price Rs 1:
- At price Rs 2:
- At price Rs 3:
- At price Rs 4:
- At price Rs 5:
- At price Rs 6: …
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