Market Supply Curve

What is Market Supply Curve?

The market supply curve depicts the output levels (plotted on the x-axis) that enterprises in the marketplace manufacture in average corresponding to distinct values of the market cost price. How is the market supply curve derived? Contemplate a market with n enterprises: enterprises 1, enterprises 2, enterprises 3 and so on. Assume the market cost price is fixed at q. Then, the output manufactured by the N’ enterprises in average is [supply of enterprise 1 at price q] + [supply of enterprise 2 at price q] + [supply of enterprise N’ at price q]. In other words, the market supply at price q is the aggregate of the supplies of individual enterprises at that cpst price. Now, let us prepare the market supply curve geometrically with just 2 enterprises in the market place : enterprise 1 and enterprise 2. The 2 enterprises have distinct cost sub structures. Enterprise 1 will not manufacture anything if the market cost price is less than q1 while Enterprise 2 will not manufacture anything if the market cost price is less than q2 . Presume, also that q2 is greater than q1.

It should be noted down that the market supply curve has been derived for a fixed number of enterprises in the market place. As the number of enterprises changes, the market supply curve shifts.

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