We are given the following supply function for low cost bakery:
This can be rearranged as:
Now we can substitute different value of
to find out the range of prices for which this quantity will be
demanded:
![]() |
P |
0 | 0.5 |
20 | 1.5 |
40 | 2.5 |
60 | 3.5 |
80 | 4.5 |
100 | 5.5 |
120 | 6.5 |
140 | 7.5 |
160 | 8.5 |
180 | 9.5 |
200 | 10.5 |
With this we can plot the individual supply curve of a low cost bakery:With this we can plot the individual supply curve of a low cost bakery:
Similarly, We are given the following supply function for high cost bakery:
This can be rearranged as:
Now we can substitute different value of
to find out the range of prices for which this quantity will be
demanded:
qHigh cost | P |
0 | 1 |
20 | 2 |
40 | 3 |
60 | 4 |
80 | 5 |
100 | 6 |
120 | 7 |
140 | 8 |
160 | 9 |
180 | 10 |
200 | 11 |
Now these were individual supply curves we are told that there are 20 low cost and 10 high cost firms. We will simply multiply the quantity by these numbers to get the market supply at these prices. This method is called the horizontal summation method.
So low cost market supply is as follows:
P | Individual supply qLow cost | Calculation | Market qLow cost |
0.5 | 0 | 0X 20 = | 0 |
1.5 | 20 | 20X 20 = | 400 |
2.5 | 40 | 40X 20 = | 800 |
3.5 | 60 | 60X 20 = | 1200 |
4.5 | 80 | 80X 20 = | 1600 |
5.5 | 100 | 100X 20 = | 2000 |
6.5 | 120 | 120X 20 = | 2400 |
7.5 | 140 | 140X 20 = | 2800 |
8.5 | 160 | 160X 20 = | 3200 |
9.5 | 180 | 180X 20 = | 3600 |
10.5 | 200 | 200X 20 = | 4000 |
P | Individual supply qHigh cost | Calculation | Market qHigh cost |
1 | 0 | 0X 10 = | 0 |
2 | 20 | 20X 10 = | 200 |
3 | 40 | 40X 10 = | 400 |
4 | 60 | 60X 10 = | 600 |
5 | 80 | 80X 10 = | 800 |
6 | 100 | 100X 10 = | 1000 |
7 | 120 | 120X 10 = | 1200 |
8 | 140 | 140X 10 = | 1400 |
9 | 160 | 160X 10 = | 1600 |
10 | 180 | 180X 10 = | 1800 |
11 | 200 | 200X 10 = | 2000 |
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