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Home Price and Output Determination Under Perfect Competition Short Run Supply Curve of the Industry

 

Short Run Supply Curve of the Industry:

 

Definition:

 

The short run supply curve of a competitive firm is that part of the marginal cost curve which lies above the average variable cost. As regards industry supply curve, it is the horizontal summation of the short run supply carves of the identical firms constituting an industry.

 

Explanation:

 

The industry short run supply curve is briefly explained with the help of the diagram (15.8) below.

 

We assume here that prices of inputs do not change with the change in the size of the firm; However, when all firms increase or decrease output, the factor prices rise or fall respectively.

 

Diagram: 

 

     

In figure 15.8(a), we assume that at point P, price or marginal revenue equals marginal cost. The firm at equilibrium point P. ($4) produces and sells 50 units of a commodity. If the equilibrium of MR, MC, price occurs at point K, the firm produces and sells 100 units.

 

 

In figure 15.8(b),  let us suppose that there are 100 firms in the industry. As all the firms by assumptions, have identical costs, the industry will be producing 5000 units at a market price of ($4) and 10000 units at industrial price of ($8). The industry supply curve, therefore, has a positive slope.

Relevant Articles:

Market Structure
Perfect Competition
Equilibrium of the Firm
Short Run Equilibrium of the Price Taker Firm
Short Run Supply Curve of a Price Taker Firm
Short Run Supply Curve of the Industry
Long Run Equilibrium of the Price Taker Firm
Long Run Supply Curve For the Industry
Price Determination Under Perfect Competition
Market Price
Determination of Short Run Normal Price
Long Run Normal Price and the Adjustment of Market Price to the Long Run Normal Price
Distinction/Difference Between Market Price and Normal Price
Interdependent Prices
Joint Supply
Fixation of Railway Rates

Composite or Rival Demand

 

Principles and Theories of Micro Economics
Definition and Explanation of Economics
Theory of Consumer Behavior
Indifference Curve Analysis of Consumer's Equilibrium
Theory of Demand
Theory of Supply
Elasticity of Demand
Elasticity of Supply
Equilibrium of Demand and Supply
Economic Resources
Scale of Production
Laws of Returns
Production Function
Cost Analysis
Various Revenue Concepts
Price and output Determination Under Perfect Competition
Price and Output Determination Under Monopoly
Price and Output Determination Under Monopolistic/Imperfect Competition
Theory of Factor Pricing OR Theory of Distribution
Rent
Wages
Interest
Profits
Principles and Theories of Macro Economics
National Income and Its Measurement
Principles of Public Finance
Public Revenue and Taxation
National Debt and Income Determination
Fiscal Policy
Determinants of the Level of National Income and Employment
Determination of National Income
Theories of Employment
Theory of International Trade
Balance of Payments
Commercial Policy
Development and Planning Economics
Introduction to Development Economics
Features of Developing Countries
Economic Development and Economic Growth
Theories of Under Development
Theories of Economic Growth
Agriculture and Economic Development
Monetary Economics and Public Finance

History of Money
 

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