Supply Curve of Industry:
The industry supply can be obtained by summation of the supply of all the firms. Therefore, the industry supply would be,
S = Σ qi (p) over all N firms, where i = 1,2,...N
If the firms are all identical then qi(p) is the same for all. Assuming qi = q, total industry supply would be S = N.q
The industry supply curve S implies the summation of all the individual supply curves of the existing firms in the market.
A Numerical Example
This is a quadratic equation in qi, therefore,
qi = [4+ (10+1.2p)]/0.6 [4- (10+1.2p )]/0.6
The individual firm's supply function is relevant for all p≥ minimum AVC.
The AVC function is AVCi = 0.1qi2 - 2qi +15
The minimum point on the AVC is located by taking derivative with respect to qi and setting the derivative equal to zero, as shown below.
d (AVCi)/dqi = 0.2qi - 2 = 0
Therefore,
qi = 10.
Substituting qi = 10 in the AVC function we get,
minimum AVC = 5.
Therefore, the firm supply function is
Si = [4 ± (1.2p - 2)]/0.6 ] for p ≥ 5
= 0 for p < 5
If the industry consists of 100 identical firms, the aggregate supply function is
S = 100× [4 ± (1.2p - 2)]/0.6 for p ≥ 5
= 0 for p < 5
At a price of 22.5, the aggregate supply would be 1500 units.