Deriving Market Supply by Aggregating Individual Firm Supplies
The market supply curve is derived by aggregating the quantities that all individual firms will supply at each price. This process, known as horizontal summation, begins with the output from the producer with the lowest marginal cost and then sequentially adds the quantities from other producers in ascending order of their marginal costs. If the supply function for the i-th firm is and there are 'm' firms, the total market supply function, , is the sum of each firm's supply: . This method is used to construct the short-run market supply curve, assuming a fixed number of firms and their production capacities.
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Introduction to Microeconomics Course
The Economy 2.0 Microeconomics @ CORE Econ
Ch.8 Supply and demand: Markets with many buyers and sellers - The Economy 2.0 Microeconomics @ CORE Econ
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Deriving Market Supply by Aggregating Individual Firm Supplies