There are three identical firms in a market. The following table shows the supply schedule of firm 1. Compute the market supply schedule.

| Price (Rs) | SS1 (units) |
|---|---|
| 0 | 0 |
| 1 | 0 |
| 2 | 2 |
| 3 | 4 |
| 4 | 6 |
| 5 | 8 |
| 6 | 10 |
| 7 | 12 |
| 8 | 14 |

Question

There are three identical firms in a market. The following table shows the supply schedule of firm 1. Compute the market supply schedule.

| Price (Rs) | SS1 (units) |
|---|---|
| 0 | 0 |
| 1 | 0 |
| 2 | 2 |
| 3 | 4 |
| 4 | 6 |
| 5 | 8 |
| 6 | 10 |
| 7 | 12 |
| 8 | 14 |

Accepted Answer

> [!TLDR]
> Market supply is the horizontal summation of individual firm supplies at each price; with three identical firms, multiply firm 1's supply by 3 at every price level.

## The Logic of Market Supply Aggregation

When we move from a single firm to the entire market, we need to add up what *all* producers are willing to supply at each price. This is called **horizontal summation** because we sum quantities (on the horizontal axis) at each given price level.

The intuition is straightforward: if firm 1 supplies 2 units at Rs 2, firm 2 supplies 2 units at Rs 2, and firm 3 supplies 2 units at Rs 2, then the market as a whole offers $2 + 2 + 2 = 6$ units at that price. We repeat this addition at every price point to build the market supply schedule.

Because the three firms are **identical**, each has the same supply schedule as firm 1. This simplifies our task: instead of adding three different schedules, we simply multiply firm 1's quantity by 3 at each price.

> [!FORMULA]
> $$Q_{	ext{market}} = Q_{	ext{firm 1}} + Q_{	ext{firm 2}} + Q_{	ext{firm 3}} = 3 	imes Q_{	ext{firm 1}}$$

## Computing the Market Supply Schedule

At each price, we take the quantity supplied by firm 1 and multiply by 3:

| Price (Rs) | SS₁ (units) | Market Supply (units) |
|------------|-------------|------------------------|
| 0 | 0 | $0 	imes 3 = 0$ |
| 1 | 0 | $0 	imes 3 = 0$ |
| 2 | 2 | $2 	imes 3 = 6$ |
| 3 | 4 | $4 	imes 3 = 12$ |
| 4 | 6 | $6 	imes 3 = 18$ |
| 5 | 8 | $8 	imes 3 = 24$ |
| 6 | 10 | $10 	imes 3 = 30$ |
| 7 | 12 | $12 	imes 3 = 36$ |
| 8 | 14 | $14 	imes 3 = 42$ | …

Price (₹)	A's demand (units)	B's demand (units)	Market demand (units)
10	5	3	8
8	8	6	14
6	12	9	21
4	17	13	30

Price (Rs)	SS₁ (units)	Market Supply (units)
0	0	$0 \times 3 = 0$
1	0	$0 \times 3 = 0$
2	2	$2 \times 3 = 6$
3	4	$4 \times 3 = 12$
4	6	$6 \times 3 = 18$
5	8	$8 \times 3 = 24$
6	10	$10 \times 3 = 30$
7	12	$12 \times 3 = 36$
8	14	$14 \times 3 = 42$

Concept understanding — Market Demand Aggregation

Market Demand Aggregation

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The Logic of Market Supply Aggregation

Computing the Market Supply Schedule

The Logic of Market Supply Aggregation

Computing the Market Supply Schedule

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