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Question
How does an increase in the number of firms in a market affect the market supply curve?
Solution
The market supply curve is a horizontal summation of all the supply curves of individual firms in the market. If the number of firms in a market increases, then the market supply curve will shift rightward as there will be more number of firms supplying more amount of output.
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RELATED QUESTIONS
Explain through a diagram the effect of a rightward shift of both the demand and supply curves on equilibrium price and quantity.
In what respect do the supply and demand curves in the labour market differ from those in the goods market?
Consider a market with two firms. The following table shows supply schedules of two firms: SS1 denotes the supply schedule of firm 1 and SS2 denotes the supply schedule of firm 2. Calculate 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 |
Consider a market with two firms. In the following table, columns labelled as SS1 and SS2 give the supply schedules of firm 1 and firm 2 respectively. Compute the market supply schedule.
|
Price (Rs ) |
SS1 (kg) |
SS2 (kg) |
|
0 |
0 |
0 |
|
1 |
0 |
0 |
|
2 |
0 |
0 |
|
3 |
1 |
0 |
|
4 |
2 |
0.5 |
|
5 |
3 |
1 |
|
6 |
4 |
1.5 |
|
7 |
5 |
2 |
|
8 |
6 |
2.5 |
There are three identical firms in a market. The following table shows the supply schedule of firm 1. Calculate 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 |
